Mondi Limited

Mondi Limited 

Annual report and accounts 2010

Introduction 

The Mondi Limited financial statements have been prepared to comply with the South African Companies Act and the JSE Limited 

Listings Requirements. 

In terms of the dual listed company (DLC) structure incorporating Mondi Limited and Mondi plc, ordinary shareholders of Mondi 

Limited have economic and voting interests in the Mondi Group, comprising both the Mondi Limited group and the Mondi plc 

group. The Mondi Group annual report, which has been issued together with this report, provides comprehensive information 

regarding the financial position and the results of the operations of the Mondi Group, as well as additional information on the 

matters reported on in this report as it relates to the Mondi Group. 

Shareholders interested in the financial results and performance of the Mondi Group are advised to review the Mondi Group 

annual report and accounts which is available at: www.mondigroup.com.

Contents 

2 Corporate governance statement 

6 Report of the directors 

8 Directors’ remuneration 

Financial statements 

12 Directors’ responsibility statement 

13 Independent auditors’ report 

14 Income statements 

15 Statements of comprehensive income 

16 Statements of financial position 

17 Statements of cash flows 

18 Statements of changes in equity 

20 Notes to the financial statements and consolidated financial statements 

ibc Shareholders’ information 

Mondi Limited 1

Corporate governance statement 

Dual listed company structure 

Mondi operates under a dual listed company (DLC) structure, 

which requires compliance with the corporate and accounting 

regulations of South Africa and the UK. Mondi Limited and 

Mondi plc (together ‘the Mondi Group’ or ‘Mondi’) have 

separate corporate identities and separate stock exchange 

listings. Under the DLC structure, any ordinary share held in 

either Mondi Limited or Mondi plc gives the holder an effective 

economic interest in the whole Mondi Group. 

Compliance statement 

Mondi Limited has complied throughout the year with the 

principles contained in the South African King II Code 

of Corporate Practices and Conduct, save that 

Cyril Ramaphosa, joint chairman, was not considered 

independent upon appointment. 

The South African King III Code of Corporate Governance 

Principles, published in September 2009, is effective for 

financial years commencing on or after 1 March 2010. 

Although the Company is not therefore required to report on 

2 Annual report and accounts 2010 

its compliance with King III until its 2011 annual report, the 

board has already reviewed the requirements and has applied 

certain of the principles that are reported on below. 

Chairmen and boards of directors 

Pursuant to the DLC structure under which Mondi operates, 

the boards of Mondi Limited and Mondi plc are identical 

(together ‘the Boards’). The Boards manage Mondi as if it 

were a single unified economic enterprise and, in addition to 

their duties to the company concerned, have regard to the 

interests of the ordinary shareholders of both Mondi Limited 

and Mondi plc in the management of the Mondi Group. The 

Boards have defined their responsibilities and have clearly 

defined the matters reserved for decision by the Boards. 

As at 31 December 2010 there were nine directors: the joint 

chairmen, three executive directors and four independent nonexecutive 

directors. There is a strong mix of skills and industry 

experience, particularly in Europe and South Africa, locations 

important to Mondi’s operations. 

Mondi Limited DLC board 

board (six 

Directors Position (one meeting) meetings) 

Cyril Ramaphosa Joint chairman 1 6 

David Williams Joint chairman 1 6 

David Hathorn Chief executive officer 1 6 

Andrew King Chief financial officer 1 6 

Colin Matthews Non-executive director 1 6 

Imogen Mkhize Non-executive director 1 6 

John Nicholas Non-executive director 1 6 

Peter Oswald Chief executive officer, 

Europe & International 

Division 1 6 

Anne Quinn Senior independent 

non-executive director 1 6

Appointments to the Boards are subject to approval by 

the Boards as a whole, having first considered the 

recommendations of the DLC nominations committee, and 

take place in accordance with a formally adopted nominations 

policy. On appointment each non-executive director receives 

letters of appointment from each of Mondi Limited and Mondi 

plc setting out, among other things, their term of appointment, 

the expected time commitment for their duties to Mondi and 

details of any DLC committees of which they are a member. 

Non-executive directors are initially appointed for a three-year 

term after which their appointment may be extended for a 

second term subject to mutual agreement. 

Joint chairmen and chief executive 

officer 

Mondi has joint chairmen, Cyril Ramaphosa and David 

Williams, with the chief executive officer role held separately 

by David Hathorn. The division of responsibilities between the 

joint chairmen and the chief executive officer has been clearly 

defined and approved by the Boards. 

David Hathorn, chief executive officer, does not hold any 

directorships external to Mondi. Whilst David Williams was 

independent upon appointment, Cyril Ramaphosa was not 

considered independent upon appointment in view of his 

existing connection with Mondi as chairman of the Shanduka 

Group, which has shareholdings in Mondi Shanduka 

Newsprint (Proprietary) Limited and Mondi Packaging South 

Africa (Proprietary) Limited (see page 80). Notwithstanding 

this, Mondi benefits greatly from his considerable knowledge 

and experience, particularly of the South African business 

environment, and the Boards firmly believe that this justifies 

his appointment. 

Senior independent director 

Anne Quinn is the senior independent director providing 

support to the joint chairmen. During the year she has chaired 

a meeting of the non-executive directors at which the 

performance of the joint chairmen was considered. She is also 

available to shareholders should they have any concerns that 

contact through other channels has failed to resolve or for 

which such contact may be inappropriate. 

Board committees 

The DLC committees (which are single committees for both 

Mondi Limited and Mondi plc, acting in the combined interest 

of both entities), to which the Boards delegate specific areas 

of responsibility as described below, have authority to make 

decisions according to their terms of reference. Each 

committee is empowered, through its terms of reference, to 

seek independent professional advice at Mondi’s expense in 

the furtherance of its duties. 

Membership of each committee is kept under review and, 

in particular, will be considered when each committee 

undertakes its annual evaluation. Each committee reviews 

its terms of reference on an annual basis. 

DLC audit committee 

DLC audit 

Committee committee 

member (four 

Members since meetings) 

Colin Matthews May 2007 4 

John Nicholas (chairman) October 2009 4 

Anne Quinn May 2007 4 

The DLC audit committee operates on a Group-wide basis. 

The committee has responsibility, among other things, for 

monitoring the integrity of the Mondi Group’s financial 

statements and reviewing the results announcements. It also 

has responsibility for reviewing the effectiveness of the Mondi 

Group’s system of internal controls and risk management 

systems. An effective internal audit function has been 

established, which formally collaborates with the external 

auditors to ensure efficient coverage of internal controls and 

is responsible for providing independent assurance to the 

DLC executive committee and Boards on the effectiveness 

of the Company’s risk management process. 

All members of the committee are independent non-executive 

directors. They each have relevant financial, accounting 

or similar experience from current and past employment. 

The Boards consider each member to have appropriate 

knowledge and understanding of financial matters, sufficient 

to enable them to consider effectively the financial and 

accounting issues that are presented to the committee. 

The Boards consider John Nicholas, DLC audit committee 

chairman, to have specific recent and relevant financial 

experience. He is a chartered accountant and a member of 

the UK Financial Reporting Review Panel. He was formerly 

the group finance director of Tate & Lyle plc and is currently 

the audit committee chairman of Ceres Power Holdings plc, 

Hunting PLC and Rotork p.l.c.. 

The DLC audit committee oversees the relationship with the 

external auditors; is responsible for their appointment, 

reappointment and remuneration; reviews the effectiveness of 

the external audit process; and ensures that the objectivity 


Corporate governance statement 

continued 

and independence of the external auditors is maintained. 

Deloitte & Touche was appointed as Mondi’s external auditors 

at the time of the demerger of Mondi from Anglo American plc 

in July 2007 and are familiar with the reporting complexities 

arising from the Mondi Group’s dual listed company structure. 

As such, the DLC audit committee does not consider that it 

would be appropriate at this time to put the audit out to 

tender, but will continue to keep this under review. Following 

these considerations and a review of the effectiveness of the 

external auditors, the committee made a recommendation to, 

which was accepted by, the board that a resolution to 

reappoint Deloitte & Touche be proposed at the annual 

general meeting of Mondi Limited in May 2011. 

Following a review, and in accordance with the JSE Listings 

Requirements, the DLC audit committee has satisfied itself 

that Andrew King, Mondi’s chief financial officer, has the 

appropriate expertise and experience. Andrew is a chartered 

accountant and throughout his career has held various finance 

and business development roles. The committee has also 

considered and satisfied itself of the appropriateness of the 

expertise and adequacy of resources of the finance function 

and expertise of the senior management responsible for the 

finance function. 

The DLC audit committee has concluded that it is satisfied 

that auditor independence and objectivity have been 

maintained. 

DLC nominations committee 

DLC 

nominations 


member (five 


Colin Matthews January 2008 5 

Imogen Mkhize January 2008 5 

John Nicholas October 2009 5 

Anne Quinn May 2007 5 

Cyril Ramaphosa May 2007 5 

David Williams (chairman) May 2007 5 

The DLC nominations committee operates on a Group–wide 

basis. The committee is responsible for making 

recommendations to the Boards on the composition of each 

board and committee and on retirements and appointments 

of additional and replacement directors. 


DLC remuneration committee 

DLC 

remuneration 


member (four 


Colin Matthews May 2007 4 

Imogen Mkhize May 2007 4 

Anne Quinn (chairman) May 2007 4 

David Williams May 2007 4 

The DLC remuneration committee operates on a Group-wide 

basis. The committee has responsibility for making 

recommendations to each board on the Mondi Group’s policy 

on remuneration of senior management, for the determination, 

within agreed terms of reference, of the remuneration of the 

joint chairmen and of specific remuneration packages for each 

of the executive directors and members of senior 

management, including pension rights and any compensation 

payments. In addition, the committee is responsible for the 

implementation of employee share plans. 

DLC sustainable development 

committee 

DLC 

sustainable 

development 


member (six 


David Hathorn May 2007 6 

Colin Matthews (chairman) May 2007 6 

Anne Quinn August 2009 6 

The DLC sustainable development committee operates on a 

Group-wide basis. During the year the committee reviewed 

the Mondi Group’s key sustainable development policies, 

monitored performance against environmental targets, 

received detailed safety reports including details of major 

incidents within the Mondi Group and monitored the senior 

management’s response to such incidents. 

Full details of Mondi’s progress on sustainability including the 

nature and extent of its social, transformation, ethical, safety, 

health and environmental management policies and practices 

can be found on Mondi Group’s website at: 

www.mondigroup.com/sustainability.

DLC executive committee 

The DLC executive committee operates on a Group-wide 

basis. The committee is chaired by David Hathorn. The 

DLC executive committee is responsible for the day-to-day 

management of the Mondi Group and its business operations 

within the limits set by the Boards, with particular focus on 

financial, operational and safety performance, together with 

policy implementation in line with the Mondi Group’s strategy 

agreed by the Boards. 

Risk management and internal control 

The DLC executive committee, mandated by the Boards, has 

established a Group-wide system of internal control to 

manage Mondi Group risks. This system, which complies with 

corporate governance codes in South Africa and the UK, 

supports the Boards in discharging their responsibility for 

ensuring that the wide range of risks associated with Mondi’s 

diverse international operations is effectively managed. 

Risk management 

The Board’s risk management framework addresses all 

significant strategic, financial, operational and compliancerelated 

risks which could undermine the Mondi Group’s ability 

to achieve its business objectives. The risk management 

framework is designed to be flexible to ensure that it remains 

relevant at all levels of the business given the diversity of the 

Mondi Group’s locations, markets and production processes. 

Clear accountability for risk management in the day-to-day 

activities of the Mondi Group is a key performance criterion for 

the Mondi Group’s line managers, who are provided with 

appropriate support through Mondi Group policies and 

procedures. The requisite risk and control capability is assured 

through Board challenge and appropriate management 

selection and skills development. 

Continuous monitoring of risk and control processes across all 

key risk areas provides the basis for regular reports to 

management, the DLC executive committee and the Boards. 

Internal control 

The Boards are responsible for establishing and maintaining 

an effective system of internal controls. This system of internal 

control, embedded in all key operations, is designed to 

provide reasonable rather than absolute assurance that the 

Mondi Group’s business objectives will be achieved within risk 

tolerance levels defined by the Boards. Regular management 

reporting provides a balanced assessment of key risks and 

controls and is an important component of the Boards’ 

assurance. In addition, certain DLC committees focus on 

specific risks such as safety, and provide relevant assurance 

to the Boards. 

Whistle-blowing programme 

The Mondi Group has a whistle-blowing programme called 

‘Speakout’. The programme, monitored by the DLC audit 

committee, enables employees, customers, suppliers, 

managers or other stakeholders, on a confidential basis, to 

raise concerns about conduct which is considered to be 

contrary to Mondi’s values. It makes communication channels 

available to any person in the world who has information 

about unethical practice in the Mondi Group’s operations. 

Dealing in securities 

The Boards have adopted a share dealing code for dealing in 

securities of Mondi Limited which is based on regulatory and 

governance best practice. The code sets out the restrictions 

placed on directors, senior management and other key 

employees with regard to their share dealing to ensure that 

they do not abuse their access to information about the 

Mondi Group pending its public release and availability to 

shareholders and other interested parties. The code is 

reviewed and updated as required to ensure continued 

compliance with regulation and best practice. 

Business ethics 

The Boards have adopted a Code of Business Ethics, which 

applies throughout the Mondi Group and sets clear principles 

for the conduct of the Mondi Group’s business activities. 

The code is available on the Mondi Group website at: 

www.mondigroup.com. 


Report of the directors 

The directors present their report and the annual financial 

statements of Mondi Limited and the Mondi Limited Group for 

the year ended 31 December 2010. 

In the context of this report and the financial statements, the 

term ‘Group’ refers to Mondi Limited (also the Company) and 

its subsidiaries, joint ventures and associates. 

Nature of business 

The Group is fully integrated across the paper and packaging 

process, from the growing of wood and the manufacture of 

pulp and paper (including recycled paper), to the conversion 

of packaging papers into corrugated packaging. 

Dividends 

An interim dividend of 33.35878 cents per ordinary share was 

declared to shareholders registered on 27 August 2010 and 

was paid on 14 September 2010. 

The directors have proposed a final dividend of 161.32545 cents 

per ordinary share to shareholders registered on 15 April 2011. 

The final dividend is subject to the approval of shareholders of 

Mondi Limited at the annual general meeting scheduled for 

5 May 2011 and, if approved, will be paid on 12 May 2011. 

Director details 


Interest of directors in contracts 

The directors have certified that they were not personally 

materially interested in any transaction of any significance with 

the Company or its subsidiaries. Accordingly, a conflict of 

interest with regards to directors’ interest in contracts does 

not exist. 

Going concern 

The following directors have held office during the year ended 31 December 2010: 

The Mondi Group’s business activities, together with the 

factors likely to affect its future development, performance and 

position are set out in the business review in the Mondi Group 

annual report and accounts 2010. The financial position of the 

Mondi Group, its cash flows, liquidity position and borrowing 

facilities are described in the financial statements on pages 12 

to 80. In addition, notes 35 and 36 to the financial statements 

include the Mondi Group’s objectives, policies and processes 

for managing its capital; its financial risk management 

objectives; details of its financial instruments and hedging 

activities; and its exposures to credit and liquidity risk. 

Mondi’s geographical spread, product diversity and large 

customer base mitigate potential risks of customer or supplier 

liquidity issues. Proactive initiatives by management in 

rationalising the business through cost-cutting, asset closure 

and divestitures have consolidated the Group’s leading cost 

Name of director Capacity Independent Effective date of appointment 

David Hathorn Executive No 7 May 1997 

Andrew King Executive No 23 October 2008 

Colin Matthews Non-executive Yes 23 May 2007 

Imogen Mkhize Non-executive Yes 23 May 2007 

John Nicholas Non-executive Yes 2 October 2009 

Peter Oswald Executive No 1 January 2008 

Anne Quinn Non-executive Yes 23 May 2007 

Cyril Ramaphosa Non-executive No 3 December 2004 

David Williams Non-executive Yes 23 May 2007

position in its chosen markets. Working capital levels and 

capital expenditure programmes are strictly monitored and 

controlled. 

The Mondi Group meets its funding requirements from a 

variety of sources including the Eurobond, the syndicated five 

year revolving credit facility expiring in June 2012 and various 

facilities in the larger operations in Russia, Poland and South 

Africa. The availability of some of these facilities is dependent 

on the Mondi Group meeting certain financial covenants all 

of which have been complied with. The Mondi Group had 

E1.5 billion of undrawn committed debt facilities as at 

31 December 2010 which should provide sufficient liquidity 

for Mondi in the medium term. 

The Mondi Group’s forecasts and projections, taking account 

of reasonably possible changes in trading performance, show 

that the Mondi Group should be able to operate well within 

the level of its current facilities and related covenants. 

After making enquiries, the directors have a reasonable 

expectation that the Mondi Group and Mondi Limited have 

adequate resources to continue in operational existence for 

the foreseeable future. Accordingly, they continue to adopt the 

going concern basis in preparing the annual report and 

accounts. 

Share capital 

Full details of the Company’s share capital can be found in 

note 26 to the financial statements. 

Auditors 

Each of the directors of Mondi Limited at the date when this 

report was approved confirms that: 

• so far as each of the directors is aware, there is no relevant 

audit information of which the Company’s auditors are 

unaware; and 

• each director has taken all the steps that he or she ought 

to have taken as a director in order to make himself or 

herself aware of any relevant audit information and to 

establish that the Company’s auditors are aware of that 

information. 

Deloitte & Touche has indicated its willingness to continue as 

auditors of Mondi Limited. The board has decided that a 

resolution to reappoint them will be proposed at the annual 

general meeting of Mondi Limited scheduled to be held on 

5 May 2011. 

The reappointment of Deloitte & Touche has the support of 

the DLC audit committee, which will be responsible for 

determining their audit fee. 

Annual general meeting 

The annual general meeting of Mondi Limited will be held at 

12:00 (SA time) on Thursday 5 May 2011 at the Hyatt 

Regency, 191 Oxford Road, Rosebank, Johannesburg 2132, 

Republic of South Africa. The notice convening the meeting is 

being sent with this report. The reports of Mondi Limited and 

of the Mondi Group are available on the Mondi Group’s 

website at: www.mondigroup.com. 

By order of the board 

Philip Laubscher 

Company secretary 


4th Floor 

No. 3 Melrose Boulevard 

Melrose Arch 

2196 

PostNet Suite #444 

Private Bag X1 

Melrose Arch 

2076 

Gauteng 

Republic of South Africa 

18 February 2011 


Directors’ remuneration 

for the year ended 31 December 2010 

Executive directors’ remuneration 

The remuneration of the executive directors who served during the period under review was as follows: 

Value of 

Annual deferred Other Noncash 

shares cash cash 

Salary 1 bonus awarded benefits benefits Total 

David Hathorn 2010 E903,629 E602,812 E602,812 E28,100 E19,123 E2,156,476 

(R8,756,284) (R5,849,043) (R5,849,043) (R272,292) (R180,170) (R20,906,832) 

2009 E867,115 E538,799 E538,799 E26,964 E18,023 E1,989,700 

(R10,051,611) (R6,277,007) (R6,277,007) (R312,573) (R207,007) (R23,125,205) 

Andrew King 2010 E501,368 E264,564 E264,564 E22,504 E23,639 E1,076,639 

(R4,784,386) (R2,567,049) (R2,567,049) (R218,060) (R219,451) (R10,355,995) 

2009 E447,543 E221,124 E221,124 E21,594 E14,291 E925,676 

(R5,187,927) (R2,576,090) (R2,576,090) (R250,318) (R164,677) (R10,755,102) 

Peter Oswald 2010 E800,000 E427,200 E427,200 E255 E36,104 E1,690,759 

(R7,726,972) (R4,145,094) (R4,145,094) (R2,478) (R379,519) (R16,399,157) 

2009 E800,000 E393,600 E393,600 E255 E34,913 E1,622,368 

(R9,231,103) (R4,585,440) (R4,585,440) (R2,964) (R388,550) (R18,793,497) 

1 The salaries of David Hathorn (£775,000) and Peter Oswald (E800,000) remained constant in local currency terms from 2009 to 2010. 

Non-executive directors’ remuneration 


2010 2009 

Other Other 

Fees benefits Total Fees benefits Total 

Cyril Ramaphosa 1 E292,387 – E292,387 E356,641 – E356,641 

(R2,746,783) (R2,746,783) (R4,145,263) (R4,145,263) 

David Williams 1 E292,387 – E292,387 E175,565 – E175,565 

(R2,746,783) (R2,746,783) (R1,965,574) (R1,965,574) 

Colin Matthews E90,726 – E90,726 E90,957 – E90,957 

(R850,088) (R850,088) (R1,044,025) (R1,044,025) 

Imogen Mkhize E74,435 – E74,435 E71,155 – E71,155 

(R697,138) (R697,138) (R822,544) (R822,544) 

John Nicholas 2 E93,065 – E93,065 E25,354 – E25,354 

(R872,062) (R872,062) (R273,769) (R273,769) 

Anne Quinn E98,913 – E98,913 E94,117 – E94,117 

(R926,998) (R926,998) (R1,078,247) (R1,078,247) 

1 Until 4 August 2009 the joint chairmen’s fees were capped at E466,110 (R3,881,174) per annum, comprising a core fee of E302,971 (R2,522,763) per annum plus 

supplemental fees reflecting their additional commitments. With effect from 5 August 2009, the remuneration of the joint chairmen was reduced to a fee of E291,319 

(R2,425,733) per annum with no supplemental fees for their additional commitments. 

2 For 2009, the fee paid to John Nicholas covers the period from his appointment on 2 October 2009 until 31 December 2009.

Pension contributions in respect of executive directors 

The executive directors all participate in defined contribution pension schemes under arrangements established by the Mondi 

Group. The contributions paid by the Mondi Group in respect of the years 2010 and 2009 are: 

Mondi Group contribution 

2010 2009 

David Hathorn E271,089 (R2,626,885) E261,236 (R3,015,483) 

Andrew King E125,418 (R1,213,579) E112,360 (R1,296,982) 

Peter Oswald E200,000 (R2,102,660) E200,000 (R2,514,960) 

Share awards granted to executive directors 

The following tables set out the share awards granted to the executive directors. 


Awards 

held at 

beginning Awards 

of year or Awards Awards Award held as 

Type on appoint- granted exercised price Date at 31 

of ment to during Shares during basis of December Release 

award 1,2 the Boards year lapsed year (ZAc) award 2010 date 

David Hathorn BSP 35,156 – – – 6547 Mar 08 35,156 Mar 11 

BSP 38,122 – – – 2301 Mar 09 38,122 Mar 12 

BSP – 37,347 – – 4596 Mar 10 37,347 Mar 13 

LTIP 84,336 – 74,665 9,671 6423 Aug 07 – Mar 10 

LTIP 95,308 – – – 6547 Mar 08 95,308 Mar 11 

LTIP 256,070 – – – 2301 Mar 09 256,070 Mar 12 

LTIP – 105,628 – – 4596 Mar 10 105,628 Mar 13 

Andrew King BSP 15,741 – – – 2301 Mar 09 15,741 Mar 12 

BSP – 15,328 – – 4596 Mar 10 15,328 Mar 13 

LTIP 90,628 – – – 2301 Mar 09 90,628 Mar 12 

LTIP – 40,188 – – 4596 Mar 10 40,188 Mar 13 

For notes 1 and 2 please refer to the table on page 10. 


Directors’ remuneration continued 


Mondi plc 

Awards 

held at 

beginning Awards 

of year or Awards Awards Award held as 

Type on appoint- granted exercised price Date at 31 

of ment to during Shares during basis of December Release 

award 1,2 the Boards year lapsed year (GBp) award 2010 date 

David Hathorn BSP 59,677 – – 59,677 464 Aug 07 – Mar 10 

BSP 88,877 – – – 394 Mar 08 88,877 Mar 11 

BSP 110,393 – – – 129 Mar 09 110,393 Mar 12 

BSP – 89,752 – – 374 Mar 10 89,752 Mar 13 

LTIP 191,407 – 169,458 21,949 464 Aug 07 – Mar 10 

LTIP 240,959 – – – 394 Mar 08 240,959 Mar 11 

LTIP 735,950 – – – 129 Mar 09 735,950 Mar 12 

LTIP – 253,844 – – 374 Mar 10 253,844 Mar 13 

Co-Investment 538,795 – – – 464 Aug 07 538,795 Jul 11 

Andrew King BSP 13,012 – – 13,012 464 Aug 07 – Mar 10 

BSP 35,026 – – – 394 Mar 08 35,026 Mar 11 

BSP 45,582 – – – 129 Mar 09 45,582 Mar 12 

BSP – 36,835 – – 374 Mar 10 36,835 Mar 13 

LTIP 64,656 – 57,242 7,414 464 Aug 07 – Mar 10 

LTIP 98,985 – – – 394 Mar 08 98,985 Mar 11 

LTIP 260,465 – – – 129 Mar 09 260,465 Mar 12 

LTIP – 96,578 – – 374 Mar 10 96,578 Mar 13 

Peter Oswald BSP 39,707 – – 39,707 464 Aug 07 – Mar 10 

BSP 67,803 – – – 394 Mar 08 67,803 Mar 11 

BSP 115,923 – – – 129 Mar 09 115,923 Mar 12 

BSP – 92,683 – – 374 Mar 10 92,683 Mar 13 

LTIP 111,605 – 98,807 12,798 464 Aug 07 – Mar 10 

LTIP 186,270 – – – 394 Mar 08 186,270 Mar 11 

LTIP 662,417 – – – 129 Mar 09 662,417 Mar 12 

LTIP – 226,055 – – 374 Mar 10 226,055 Mar 13 

1 Awards under the LTIP and Co-Investment Plan are subject to performance conditions. 

2 The value on award of the BSP awards set out in this table is included in the table of executive directors’ remuneration on page 8. 

Sharesave 

Executive directors held the following options over Mondi plc ordinary shares under the Mondi Sharesave Option Plan. 


Awards held Awards Awards 

at beginning Awards exercised/ Exercise held as 

of year or on granted lapsed price Date at 31 

appointment to during during per share of December Exercise 

the Boards year year (GBp) award 2010 period 

David Hathorn 15,808 – – 99 Mar 09 15,808 1 May 14 – 

31 Oct 14 

Andrew King 15,808 – – 99 Mar 09 15,808 1 May 14 – 

31 Oct 14

Share Incentive Plan 

Details of shares purchased and awarded to executive directors in accordance with the terms of the Share Incentive Plan. 

Shares held Total shares 

at beginning Partnership Matching held as 

of year or on shares shares Shares at 31 

appointment to acquired awarded released December 

the Boards during year during year during year 2010 

David Hathorn 1,992 344 344 – 2,680 

Andrew King 2,436 344 344 – 3,124 

1 

Since 1 January 2011 up to the date of this report, David Hathorn has acquired 49 partnership shares and was awarded 49 matching shares. Andrew King acquired 48 

partnership shares and was awarded 48 matching shares. 

Directors’ beneficial share interests 

The beneficial share interests of the directors and their connected persons as at 1 January 2010 or, if later, on appointment, and as 

at 31 December 2010 were as follows: 

1 January 2010 31 December 2010 


David Hathorn 1,066 558 

Andrew King 802 802 

Imogen Mkhize 4,000 4,000 

Total 5,868 5,360 

Mondi plc 

Cyril Ramaphosa 7,050 7,050 

David Williams 5,000 5,000 

David Hathorn 493,107 250,437 

Andrew King 110,026 92,059 

Colin Matthews 5,825 5,825 

Imogen Mkhize – 2,000 

John Nicholas 6,000 6,000 

Peter Oswald 201,889 140,000 

Anne Quinn 11,882 11,882 

Total 840,779 520,253 

There has been no change in the interests of the directors and their connected persons between 31 December 2010 and the date 

of this report. 

Mondi Limited and Mondi plc share prices 

The closing price of a Mondi Limited ordinary share on the JSE Limited on 31 December 2010 was R53.80 and the range during 

the period between 1 January 2010 and 31 December 2010 was R42.00 (low) and R60.77 (high). 

The closing price of a Mondi plc ordinary share on the London Stock Exchange on 31 December 2010 was 513.5p and the range 

during the period between 1 January 2010 and 31 December 2010 was 335.0p (low) to 557.5p (high). 


Directors’ responsibility statement 

The directors are responsible for preparing the annual report, directors’ remuneration report and the financial statements in 

accordance with applicable laws and regulations. 

South African company law requires the directors to prepare financial statements for each financial year giving a true and fair view 

of the Group’s and the Mondi Limited Company’s state of affairs at the end of the year and profit or loss for the year. The directors 

have prepared the Group’s consolidated financial statements and the Company’s financial statements in accordance with 

International Financial Reporting Standards (IFRS). 

In preparing the Group’s consolidated financial statements and the Company’s financial statements, International Accounting 

Standard 1, ‘Presentation of Financial Statements’, requires that the directors: 

• properly select and consistently apply accounting policies; 

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable 

information; 

• provide additional disclosure when compliance with the specific requirements in IFRS are insufficient to enable users to 

understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial 

performance; and 

• make an assessment of the Group’s and Company’s ability to continue as a going concern. 

Report on the financial statements 

We confirm that to the best of our knowledge the financial statements, prepared in accordance with IFRS and the Companies 

Act of South Africa, give a true and fair view of the assets, liabilities, financial position and profit or loss of Mondi Limited and the 

undertakings included in the consolidation taken as a whole. 

David Hathorn Andrew King 

Director Director 

18 February 2011 18 February 2011 

Compliance statement by the company secretary 

The company secretary, Philip Laubscher, certifies that Mondi Limited has lodged with the Registrar of Companies all such returns 

as are required for a public company in terms of section 268G(d) of the Companies Act, 1973, as amended, and that all such 

returns are true, correct and up to date in respect of the financial year reported upon. 


Company secretary 

Johannesburg 


12 Annual report and accounts 2010

Independent auditors’ report to the 

members of Mondi Limited 

Report on the financial statements 

We have audited the Group’s consolidated financial statements and the financial statements of Mondi Limited for the year ended 

31 December 2010 which comprise the directors’ report, the audit committee statement on pages 3 to 4 of the corporate 

governance statement, the consolidated statement of financial position and the statement of financial position, the consolidated 

income statement and the income statement, the consolidated statement of comprehensive income and the statement of 

comprehensive income, the consolidated statement of cash flows and the statement of cash flows, the consolidated statement of 

changes in equity and the statement of changes in equity for the year then ended, the summary of significant accounting policies 

and the explanatory notes 1 to 39. 

Directors’ responsibility for the financial statements 

The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with 

International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa, and for such 

internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material 

misstatement, whether due to fraud or error. 

Auditors’ responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in 

accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements, and plan 

and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 

The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the 

financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control 

relevant to the entity’s preparation and presentation of the financial statements in order to design audit procedures that are 

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal 

control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting 

estimates made by the directors, as well as evaluating the overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion 

In our opinion, these financial statements present, in all material respects, the financial position of the Group and of the Company 

as at 31 December 2010, and of their financial performance and its cash flows for the year then ended in accordance with 

International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. 

Bronwyn Kilpatrick 

Partner 

Sandton 


Deloitte & Touche 

Registered Auditors 

Building 33, Deloitte Place, The Woodlands 

Woodlands Drive, Woodmead, Sandton 


National Executive GG Gelink Chief Executive AE Swiegers Chief Operating Officer GM Pinnock Audit DL Kennedy Risk Advisory 

NB Kader Tax & Legal Services L Geeringh Consulting L Bam Corporate Finance JK Mazzocco Human Resources 

CR Beukman Finance TJ Brown Clients NT Mtoba Chairman of the Board MJ Comber Deputy Chairman of the Board. 

A full list of partners and directors is available on request. 

B-BBEE rating: Level 2 contributor/AAA (certified by Empowerdex) 

Member of Deloitte Touche Tohmatsu Limited 


Income statements 


Group Company 

R million Notes 2010 2009 2010 2009 

Revenue 2 11,717 11,137 5,606 5,568 

Materials, energy and consumables used (5,422) (5,371) (2,624) (2,785) 

Variable selling expenses (1,482) (1,430) (857) (864) 

Gross margin 4,813 4,336 2,125 1,919 

Maintenance and other indirect expenses (667) (631) (351) (335) 

Personnel costs (1,939) (1,773) (905) (766) 

Other net operating expenses (351) (355) (3) (85) 

Depreciation, amortisation and impairments (842) (845) (507) (505) 

Operating profit before special items 2/3 1,014 732 359 228 

Operating special items 4 (256) (171) (241) (248) 

Operating profit/(loss) 758 561 118 (20) 

Non-operating special items 4 152 – 152 – 

Net income from associates 13 3 – – – 

Total profit/(loss) from operations 

and associates 913 561 270 (20) 

Net finance (costs)/income 5 (334) (483) 67 1 

Investment income 5 250 181 480 418 

Financing costs 5 (584) (664) (413) (417) 

Profit/(loss) before tax 579 78 337 (19) 

Tax charge 6 (159) (123) (114) (28) 

Profit/(loss) from continuing operations 420 (45) 223 (47) 

Attributable to: 

Non-controlling interests 56 31 

Equity holders of the parent company 364 (76) 

Earnings per share (EPS) for profit/(loss) 

attributable to equity holders of the 

parent company 

Basic EPS (R cents) 7 247.6 (51.8) 

Diluted EPS (R cents) 7 247.6 (51.8) 

Basic underlying EPS (R cents) 7 291.8 34.7 

Diluted underlying EPS (R cents) 7 291.8 34.4 

Basic headline EPS (R cents) 7 266.0 (3.4) 

Diluted headline EPS (R cents) 7 266.0 (3.4) 


Statements of comprehensive income 


Group Company 


Profit/(loss) for the financial year 420 (45) 223 (47) 

Other comprehensive income: 

Effect of cash flow hedges 24 (7) 6 – – 

Actuarial (losses)/gains and surplus restriction 

on post-retirement benefit schemes 24 (214) 91 (196) 74 

Effect of option 24 3 – – – 

Tax relating to components of other 

comprehensive income 24 67 (26) 54 (21) 

Other comprehensive income for the 

financial year, net of tax 24 (151) 71 (142) 53 

Total comprehensive income for the 

financial year 269 26 81 6 


Non-controlling interests 54 35 

Equity holders of the parent company 215 (9) 


Statements of financial position 

as at 31 December 2010 

Group Company 


Intangible assets 9 649 689 – – 

Property, plant and equipment 10 7,697 8,119 5,653 6,077 

Forestry assets 11 2,838 2,675 2,101 2,007 

Investments in subsidiaries 12 – – 2,397 2,238 

Investments in associates 13 56 30 – – 

Investments in joint ventures 14 – – 368 249 

Financial asset investments 15 133 94 152 135 

Deferred tax assets 22 37 71 – – 

Retirement benefits surplus 23 81 83 60 79 

Total non-current assets 11,491 11,761 10,731 10,785 

Inventories 16 1,133 1,209 373 475 

Trade and other receivables 17 2,244 2,153 1,183 1,160 

Investments in subsidiaries 12 – – 77 74 

Financial asset investments 15 4 – 22 – 

Cash and cash equivalents 216 422 8 4 

Derivative financial instruments 20 19 7 17 3 

Total current assets 3,616 3,791 1,680 1,716 

Assets held for sale 30 12 372 10 371 

Total assets 15,119 15,924 12,421 12,872 

Short-term borrowings 19 (1,815) (1,549) (1,719) (1,182) 

Trade and other payables 18 (1,621) (1,728) (743) (821) 

Current tax liabilities (12) (28) – – 

Provisions 21 (110) (65) (83) (59) 

Derivative financial instruments 20 (9) (3) (2) (1) 

Total current liabilities (3,567) (3,373) (2,547) (2,063) 

Medium and long-term borrowings 19 (1,567) (2,739) (299) (1,270) 

Retirement benefits obligation 23 (827) (637) (741) (584) 

Deferred tax liabilities 22 (1,715) (1,710) (1,468) (1,429) 

Provisions 21 (32) (48) (27) (31) 

Other non-current liabilities (51) (67) – – 

Derivative financial instruments 20 (27) (19) – – 

Total non-current liabilities 

Liabilities directly associated with assets 

(4,219) (5,220) (2,535) (3,314) 

classified as held for sale 30 – (93) – (93) 

Total liabilities (7,786) (8,686) (5,082) (5,470) 

Net assets 

Equity 

7,333 7,238 7,339 7,402 

Ordinary share capital 26 103 103 103 103 

Share premium 26 5,073 5,073 5,073 5,073 

Retained earnings and other reserves 

Total attributable to equity holders 

1,802 1,750 2,163 2,226 

of the parent company 6,978 6,926 7,339 7,402 

Non-controlling interests in equity 355 312 – – 

Total equity 7,333 7,238 7,339 7,402 

The Group’s consolidated financial statements and the Company’s financial statements, and related notes 1 to 39, were approved 

by the board and authorised for issue on 18 February 2011 and were signed on its behalf by: 

David Hathorn Andrew King 

Director Director 


Statements of cash flows 


Group Company 


Cash generated from operations 31a 2,020 2,518 1,154 1,263 

Dividends from associates 13 – 1 – – 

Income tax paid (63) (41) (16) (13) 

Net cash generated from operating 

activities 1,957 2,478 1,138 1,250 

Cash flows from investing activities 

Acquisition of subsidiaries, net of cash 

and cash equivalents 28 – (1) – – 

Proceeds from disposal of subsidiaries, 

net of cash and cash equivalents 29 357 1 357 – 

Investment in property, plant and equipment 10 (578) (524) (269) (302) 

Proceeds from the disposal of tangible 

and intangible assets 1 64 (3) 61 

Investment in forestry assets 11 (448) (465) (381) (392) 

Investment in financial asset investments 15 (10) (9) (24) (8) 

Proceeds from disposal of financial asset 

investments 15 – – 4 – 

Investment in associates 13 (20) – – – 

Loan advances to related parties (50) (51) (281) (317) 

Loan repayments from/(advances to) 

external parties 8 12 (23) 9 

Interest received 75 54 321 291 

Other investing activities – 1 – – 

Net cash used in investing activities (665) (918) (299) (658) 

Cash flows from financing activities 

Repayment of short-term borrowings 31c (914) (891) (454) (640) 

Proceeds from/(repayment of) medium 

and long-term borrowings 31c 189 (59) 200 270 

Interest paid (397) (560) (241) (316) 

Dividends paid to non-controlling interests 8 (7) (4) – – 

Dividends paid to equity holders of the 

parent company 8 (157) (135) (157) (135) 

Purchases of treasury shares (20) (8) – – 

Payment of Mondi plc share-based 

payment charge (1) (1) (1) (1) 

Repayment of non-current liabilities (7) – – – 

Other financing activities – – 1 – 

Net cash used in financing activities (1,314) (1,658) (652) (822) 

Net (decrease)/increase in cash and 

cash equivalents (22) (98) 187 (230) 

Cash and cash equivalents at 

beginning of year 1 (199) 149 (612) (132) 

Cash movement in the year 31c (22) (98) 187 (230) 

Reclassification 31c – (250) – (250) 

Cash and cash equivalents at 

end of year 1 (221) (199) (425) (612) 

Note: 

1 

‘Cash and cash equivalents’ includes overdrafts and cash flows from disposal groups and is reconciled to the statements of financial position in note 31b. 


Statements of changes in equity 


Group 

Mondi Mondi 

Total 

attributable 

to equity 

Limited Limited holders of Nonshare 

share Retained Other the parent controlling Total 

R million capital premium earnings reserves1 company interests equity 

At 1 January 2009 103 5,073 1,712 172 7,060 277 7,337 

Dividends paid – – (135) – (135) (4) (139) 

Total comprehensive income for the year 

Issue of Mondi Limited shares 

– – (76) 67 (9) 35 26 

under employee share schemes 

Purchases of treasury shares 

– – 13 (13) – – – 

(see note 26) 

Share options exercised – Anglo 

– – (8) – (8) – (8) 

American share scheme – – (4) – (4) – (4) 

Disposal of businesses (see note 30) – – 3 – 3 – 3 

Other – – 5 14 19 4 23 

At 31 December 2009 103 5,073 1,510 240 6,926 312 7,238 

Dividends paid – – (157) – (157) (7) (164) 


Issue of Mondi Limited shares under 

– – 364 (149) 215 54 269 

employee share schemes2 Purchases of treasury shares 

– – 12 (6) 6 – 6 

(see note 26) 


– – (20) – (20) – (20) 

American share scheme – – (1) – (1) – (1) 

Reclassification – – (2) 6 4 (4) – 

Other – – (12) 17 5 – 5 

At 31 December 2010 103 5,073 1,694 108 6,978 355 7,333 

Notes: 

1 Other reserves are analysed further below. 

2 The net amount of R6 million is a deferred tax asset for a future tax deduction available to the Group when the treasury shares are issued to share scheme participants. 

Other reserves1 Group 

Share- Cumulative Postbased 

translation Cash flow retirement Nonpayment 

adjustment hedge benefit Option distributable 

R million reserve reserve reserve reserve reserve reserves Total 

At 1 January 2009 18 (5) (18) 62 (54) 169 172 

Total comprehensive income for the year – – 5 62 – – 67 

Mondi share schemes’ charge 


10 – – – – – 10 

employee share schemes 

Issue of Mondi plc shares under 

(13) – – – – – (13) 

employee share schemes (1) – – – – – (1) 

Non-controlling put option issued – – – – 5 – 5 

At 31 December 2009 14 (5) (13) 124 (49) 169 240 

Total comprehensive income for the year – – – (152) 3 – (149) 

Mondi share schemes’ charge 


18 – – – – – 18 

employee share schemes 

Issue of Mondi plc shares under 

(6) – – – – – (6) 

employee share schemes (1) – – – – – (1) 

Reclassification 6 – – – – – 6 

At 31 December 2010 

Note: 

31 (5) (13) (28) (46) 169 108 

1 

All movements in other reserves are disclosed net of non-controlling interests. The movements in non-controlling interests as a direct result of the movements in other 

reserves for the year ended 31 December 2010 are as follows – decrease in non-controlling interests related to total comprehensive income for the year of R2 million 

(2009: increase of R4 million). 


Company 

Mondi Mondi 

Total 

attributable 

to equity 

Limited Limited holders 

share share Retained Other of the 

R million capital premium earnings reserves1 Company 

At 1 January 2009 103 5,073 2,114 245 7,535 

Dividends paid – – (135) – (135) 


Issue of Mondi Limited shares 

– – (47) 53 6 

under employee share schemes 


– – 4 (4) – 

American share scheme 

Shares vested from Mondi Incentive 

– – (4) – (4) 

Schemes Trust – – (5) – (5) 

Other – – – 5 5 

At 31 December 2009 103 5,073 1,927 299 7,402 

Dividends paid – – (157) – (157) 



– – 223 (142) 81 

employee share schemes2 Share options exercised – Anglo 

– – 8 (2) 6 

American share scheme 

Shares vested from Mondi Incentive 

– – (1) – (1) 

Schemes Trust – – (1) – (1) 

Other – – – 9 9 

At 31 December 2010 103 5,073 1,999 164 7,339 

Notes: 

1 

Other reserves are analysed further below. 

2 

The net amount of R6 million is a deferred tax asset for a future tax deduction available to the Company when the treasury shares are issued to share scheme 

participants. 

Other reserves Company 

Share- Postbased 

retirement Nonpayment 

benefit distributable 

R million reserve reserve reserves Total 

At 1 January 2009 10 66 169 245 

Total comprehensive income for the year – 53 – 53 

Mondi share schemes’ charge 6 – – 6 

Issue of Mondi Limited shares under employee share schemes (4) – – (4) 

Issue of Mondi plc shares under employee share schemes (1) – – (1) 

At 31 December 2009 11 119 169 299 

Total comprehensive income for the year – (142) – (142) 

Mondi share schemes’ charge 10 – – 10 

Issue of Mondi Limited shares under employee share schemes (2) – – (2) 

Issue of Mondi plc shares under employee share schemes (1) – – (1) 

At 31 December 2010 18 (23) 169 164 


Notes to the financial statements and 

consolidated financial statements 


1 Accounting policies 

Basis of preparation 

The consolidated financial statements and financial statements have been prepared in accordance with International Financial 

Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The Group has also complied with 

South African Statements and Interpretations of Statements of Generally Accepted Accounting Practice. There are no differences 

for the Group and Company in applying IFRS as issued by the IASB. The financial statements have been prepared on a going 

concern basis. These financial statements should be read in conjunction with the Mondi Group’s dual listed company (DLC) 

combined and consolidated financial statements. 

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and 

financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The 

principal accounting policies adopted are set out below. 

Basis of consolidation 

Dual listed structure 

The Mondi Group has two separate legal parent entities, Mondi Limited and Mondi plc, which operate under a DLC structure. 

The substance of the DLC structure is such that Mondi Limited and its subsidiaries, and Mondi plc and its subsidiaries, operate 

together as a single economic entity through a sharing agreement, with neither parent entity assuming a dominant role. The effects 

of this sharing agreement and the DLC have been ignored for the purpose of preparing these South African silo financial 

statements which have been prepared to comply with the South African Companies Act of 1973. 

Subsidiary undertakings 

The consolidated financial statements incorporate the assets, liabilities, equity, revenues, expenses and cash flows of Mondi 

Limited, and of its respective subsidiary undertakings drawn up to 31 December each year. All intra-group balances, transactions, 

income and expenses are eliminated. Subsidiary undertakings are those entities over which the Group has the power, directly or 

indirectly, to govern operating and financial policy in order to obtain economic benefits. 

The results of subsidiaries acquired or disposed of during the years presented are included in the consolidated income statement 

from the effective date of acquiring control or up to the effective date of disposal, as appropriate. Where necessary, adjustments 

are made to the results of subsidiaries to bring their accounting policies into alignment with those used by the Group. 

The interest of non-controlling interests is measured, at initial recognition, as the non-controlling proportion of the fair values of the 

assets and liabilities recognised at acquisition, except for those instances where the Group elects to measure the non-controlling 

interests at fair value in accordance with the allowance provided in IFRS 3, ‘Business Combinations’ (revised). 

After initial recognition non-controlling interests are measured as the aggregate of the value at initial recognition and their 

subsequent proportionate share of profits and losses. 

The Company’s investments in subsidiaries and joint ventures are reflected at cost less amounts written off and provisions for 

any impairments. 

Associates 

Associates are investments over which the Group is in a position to exercise significant influence, but not control or joint control, 

through participation in the financial and operating policy decisions of the investee. Typically, the Group owns between 20% and 

50% of the voting equity of its associates. Investments in associates are accounted for using the equity method of accounting 

except when classified as held for sale. 

The Group’s share of associates’ net income, presented net of tax, is based on financial statements drawn up to reporting dates 

that are either coterminous with that of the Group or no more than three months prior to that date. Where reporting dates are not 

coterminous, adjustments are made to the associate’s net income for the effects of significant transactions or events that occur 

after the associate’s reporting date up to the reporting date of the Group. 

The total carrying values of investments in associates represent the cost of each investment including the carrying value of goodwill, 

the share of post-acquisition retained earnings, any other movements in reserves and any long-term debt interests which in substance 

form part of the Group’s net investment in that entity. The carrying values of associates are reviewed on a regular basis and if an 

impairment has occurred, it is written off in the year in which those circumstances arose. The Group’s share of an associate’s losses in 

excess of its interest in that associate is not recognised unless the Group has an obligation to fund such losses. 


1 Accounting policies (continued) 

Joint ventures 

A joint venture is an entity in which the Group holds a long-term interest with a contractually agreed sharing of control over the 

strategic, financial and operating decisions with one or more other venturers. 

The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share 

of the joint venture’s individual income, expenditure, assets, liabilities and cash flows on a line-by-line basis with similar items in the 

Group’s consolidated financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group 

to the joint venture that is attributable to the other venturers. The Group does not recognise its share of profits or losses from the 

joint venture that result from the Group’s purchase of assets from the joint venture until it resells the assets to an independent 

party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable 

value of current assets, or an impairment loss. 

Revenue recognition 

Sale of goods 

Revenue is derived principally from the sale of goods and is measured at the fair value of the consideration received or receivable, 

after deducting discounts, volume rebates, value added tax and other sales taxes. A sale is recognised when the significant risks 

and rewards of ownership have been transferred. This is when title and insurance risk has passed to the customer, and the goods 

have been delivered to a contractually agreed location. 

Sale of green energy and CO 2 credits 

Revenues generated from the sale of green energy and CO 2 credits issued under international schemes are recorded as income 

within ‘other net operating expenses’ in the income statement when ownership rights pass to the buyer. 

Investment income 

Interest income, which is derived from cash and cash equivalents, available-for-sale investments, and loans and receivables, 

is accrued on a time proportion basis, by reference to the principal outstanding and at the applicable effective interest rate. 

Dividend income 

Dividend income from investments is recognised when the shareholder’s right to receive payment has been established. 

Business combinations 

Identifiable net assets 

At the date of acquisition the identifiable assets, liabilities and contingent liabilities of a subsidiary, a joint venture or an associate, 

are recorded at their fair values on acquisition date. Assets and liabilities, which cannot be measured reliably, are recorded at 

provisional fair values which are finalised within 12 months of the acquisition date. 

Cost of a business combination 

The cost of a business combination includes the fair value of assets provided, liabilities incurred or assumed, and any equity 

instruments issued by a Group entity, in exchange for control of an acquiree. The directly attributable costs associated with a 

business combination are expensed as incurred. 

Goodwill 

Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is attributed to goodwill. Goodwill is 

subsequently measured at cost less any accumulated impairment losses. 

Goodwill in respect of subsidiaries and joint ventures is included within intangible assets. Goodwill relating to associates is included 

within the carrying value of associates. 

Where the fair values of the identifiable net assets acquired exceed the cost of the acquisition, the surplus, which represents the 

discount on the acquisition (bargain purchase), is credited to the consolidated income statement in the year of acquisition. 




continued 



Impairment of goodwill 

Goodwill arising on business combinations is allocated to the group of cash-generating units that are expected to benefit from the 

synergies of the combination and represents the lowest level at which goodwill is monitored by the board for internal management 

purposes. The recoverable amount of the group of cash-generating units to which goodwill has been allocated is tested for 

impairment annually on a consistent date during each financial year, or when events or changes in circumstances indicate that it 

may be impaired. 

Any impairment is recognised in the consolidated income statement. Impairments of goodwill are not subsequently reversed. 

Non-current non-financial assets excluding goodwill, deferred tax and retirement benefits surplus 

Property, plant and equipment 

Property, plant and equipment comprise land and buildings, property, plant and equipment and assets in the course of 

construction. 

Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes all costs 

incurred in bringing the assets to the location and condition for their intended use and includes borrowing costs incurred up to the 

date of commissioning. 

Depreciation is charged so as to write off the cost of assets, other than land, and assets in the course of construction, over their 

estimated useful lives to their estimated residual values. 

Assets in the course of construction are carried at cost, less any recognised impairment. Depreciation commences when the 

assets are ready for their intended use. Buildings and plant and equipment are depreciated to their residual values at varying rates, 

on a straight-line basis over their estimated useful lives. Estimated useful lives range from three years to 20 years for items of plant 

and equipment and to a maximum of 50 years for buildings. 

Residual values and useful lives are reviewed at least annually. 

Assets held under finance leases are capitalised at the lower of cash cost and the present value of minimum lease payments at the 

inception of the lease. These assets are depreciated over the shorter of the lease term and the expected useful lives of the assets. 

Licences, other intangibles and research and development expenditure 

Licences and other intangibles are measured initially at purchase cost and are amortised on a straight-line basis over their 

estimated useful lives. Estimated useful lives vary between three years and ten years and are reviewed at least annually. 

Research expenditure is written off in the year in which it is incurred. Development costs are reviewed annually and are recognised 

as an expense if they do not qualify for capitalisation. Development costs are capitalised when the completion of the asset is both 

commercially and technically feasible and is amortised on a systematic basis over the economic life of the related development. 

Impairment of tangible and intangible assets excluding goodwill 

At each reporting date, the Group and Company review the carrying amounts of its tangible and intangible assets to determine 

whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is 

estimated in order to determine the extent of the impairment, if any. Where the asset does not generate cash flows that are 

independent from other assets, the Group and Company estimate the recoverable amount of the cash-generating unit to which the 

asset belongs. 

The recoverable amount of the asset, or cash-generating unit, is the higher of its fair value less costs to sell and its value-in-use. In 

assessing value-in-use, the estimated future cash flows generated by the asset are discounted to their present value using a 

discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which 

estimates of future cash flows have not been adjusted. 



If the recoverable amount of an asset, or cash-generating unit, is estimated to be less than its carrying amount, the carrying 

amount of the asset, or cash-generating unit, is reduced to its recoverable amount. An impairment is recognised as an expense. 

Where the underlying circumstances change such that a previously recognised impairment subsequently reverses, the carrying 

amount of the asset, or cash-generating unit, is increased to the revised estimate of its recoverable amount. Such reversal is 

limited to the carrying amount that would have been determined had no impairment been recognised for the asset, or cashgenerating 

unit, in prior years. A reversal of an impairment is recognised in the income statement. 

Agriculture 

Owned forestry assets 

Owned forestry assets are measured at fair value, calculated by applying the expected selling price, less costs to harvest and 

deliver, to the estimated volume of timber on hand at each reporting date. The estimated volume of timber on hand is determined 

based on the maturity profile of the area under afforestation, the species, the geographic location and other environmental 

considerations and excludes future growth. The product of these is then adjusted to present value by applying a market related 

pre tax discount rate. 

Changes in fair value are recognised in the income statement within ‘Other net operating expenses’. At point of felling, the carrying 

value of forestry assets is transferred to inventory. 

Directly attributable costs incurred during the year of biological growth and investments in standing timber are capitalised and 

presented within cash flows from investing activities in the statement of cash flows. 

Non-current assets held for sale 

Non-current assets, and disposal groups, are classified as held for sale if their carrying amount will be recovered through a sale 

transaction rather than through continuing use. Non-current assets, and disposal groups, classified as held for sale are measured 

at the lower of carrying amount and fair value less costs to sell from the date on which these conditions are met. 

Any resulting impairment is reported through the income statement as a special item. On classification as held for sale, the assets 

are no longer depreciated or amortised. Comparative amounts are not adjusted. 

Discontinued operations are either a separate major line of business or geographical area of operations that have been sold or are 

part of a single co-ordinated plan for disposal, or represent a subsidiary acquired exclusively with a view to resale. 

Current non-financial assets 

Inventory 

Inventory and work-in-progress are valued at the lower of cost and net realisable value. Cost is determined on the first-in-first-out 

(FIFO) basis. Cost comprises direct materials and overheads that have been incurred in bringing the inventories to their present 

location and condition. Net realisable value is defined as the selling price less any estimated costs to sell. 

Retirement benefits 

The Group and Company operate both defined benefit and defined contribution schemes for its employees as well as postretirement 

medical plans. 




continued 



Defined contribution plans 

For defined contribution schemes, the amount charged to the income statement is the contributions paid or payable during the 

year. 

Defined benefit and post-retirement medical plans 

For defined benefit pension and post-retirement medical plans, actuarial valuations are performed at each financial year end. 

The average discount rate for the plans’ liabilities is based on AA rated corporate bonds or similar government bonds of a suitable 

duration and currency. Pension plans’ assets are measured using year end market values. 

Actuarial gains and losses, which arise from differences between expected and actual outcomes or changes in actuarial 

assumptions, are recognised immediately in other comprehensive income and accumulated in equity. Any increase in the present 

value of plan liabilities expected to arise from employee service during the year is charged to operating profit. The expected return 

on plan assets and the expected increase during the year in the present value of plan liabilities are included in investment income 

and interest expense respectively. 

Past service cost is recognised immediately to the extent that the benefits are already vested or is amortised on a straight-line 

basis over the period until the benefits become vested. 

The retirement benefits obligation recognised in the statement of financial position represents the present value of the defined 

benefit obligation as adjusted for unrecognised past service costs and as reduced by the fair value of scheme assets. Any asset 

(retirement benefits surplus) resulting from this calculation is limited to past service costs, plus the present value of available refunds 

and reductions in future contributions to the relevant Group and Company scheme. 

Tax 

The tax expense represents the sum of the current tax charge, the movement in deferred tax and Secondary Tax on Companies (STC). 

Current tax 

The current tax payable is based on taxable profit for the year. The Group’s and Company’s liability for current tax is calculated 

using tax rates that have been enacted or substantively enacted by the reporting date. 

The Group and Company pay STC on dividends declared by South African entities net of dividends received, based on the 

applicable STC rate. 

Deferred tax 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities 

in the Group’s consolidated financial statements and Company’s financial statements and the corresponding tax bases used in the 

computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally 

recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable 

profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not 

recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition, other than in a 

business combination, of other assets and liabilities in a transaction that affects neither the tax profit nor accounting profit. 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint ventures and 

associates, except where the Group and Company are able to control the reversal of the temporary difference and it is probable 

that the temporary difference will not reverse in the foreseeable future. 

The carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to the extent that it is no longer 

probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. 



Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. 

Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to other 

comprehensive income and accumulated in equity, in which case the deferred tax is also taken directly to other comprehensive 

income and accumulated in equity. 

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority and the Group and 

Company intend to settle its current tax assets and liabilities on a net basis. 

Leases 

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership 

to the lessee. All other leases are classified as operating leases. 

Operating leases 

Rental costs under operating leases are charged to the income statement in equal annual amounts over the lease term unless 

another systematic basis is more representative of the pattern of use. 

Finance leases 

Assets held under finance leases are recognised as assets of the Group and Company at inception of the lease at the lower of fair 

value or the present value of the minimum lease payments derived by discounting using the interest rate implicit in the lease. The 

interest element of the rental is recognised as a finance charge in the income statement, unless it is directly attributable to 

qualifying assets, in which case it is capitalised in accordance with the Group’s and Company’s policy on borrowing costs. 

Provisions 

Provisions are recognised when the Group and Company have a present obligation as a result of a past event, which it will be 

required to settle. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at 

the reporting date, and are discounted to present value where the effect is material. 

Restoration and environmental costs 

An obligation to incur restoration and environmental costs arises when environmental disturbance is caused by the ongoing 

production of a plant or landfill site. Costs for restoration of site damage are provided for at their present values and charged 

against profit or loss as the obligation arises. 

Foreign currency transactions and translation 

Foreign currency transactions 

Foreign currency transactions are recorded in their functional currencies at the exchange rates ruling on the dates of the 

transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the 

rates prevailing on the reporting date. Gains and losses arising on translation are included in the income statement for the year and 

are classified as either operating or financing depending on the nature of the monetary item giving rise to them. 

Translation of overseas operations 

The Group’s and Company’s results are presented in rands (the Group’s and Company’s functional and presentation currency), the 

currency in which most of its business is conducted. On consolidation, the assets and liabilities of the Group’s overseas operations 

are translated into the presentation currency of the Group at exchange rates prevailing on the reporting date. Income and expense 

items are translated at the average exchange rates for the year where these approximate the rates at the dates of transactions. 

Exchange differences arising, if any, are recognised directly in other comprehensive income, and accumulated in equity. Such 

translation differences are reclassified to profit or loss only on disposal or partial disposal of the overseas operation. 




continued 



Share-based payments 

The Group and Company operate a number of equity-settled, share-based compensation schemes. The fair value of the employee 

services received in exchange for the grant of share awards is recognised concurrently as an expense and an adjustment to equity. 

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share awards granted, 

as adjusted for market performance conditions and non-vesting conditions where applicable. Vesting conditions are included in 

assumptions about the number of awards that are expected to vest. At each reporting date, the Group and Company revise their 

estimate of the number of share awards that are expected to vest. It recognises the impact of the revision to original estimates, if 

any, in the income statement, with a corresponding adjustment to equity. 

Financial instruments 

Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position and in the 

Company’s statement of financial position when the Group and Company become party to the contractual provisions of the 

instrument. 

Financial asset investments 

Investments, other than investments in subsidiaries, joint ventures and associates, are either classified as available-for-sale or loans 

and receivables. 

Available-for-sale investments are initially recorded at fair value. They are subsequently remeasured at each reporting date to fair 

value. Any unrealised gains and losses are recognised in other comprehensive income and deferred in equity until an investment is 

disposed of or impaired, at which time the cumulative gain or loss deferred in equity is included in the income statement. 

Loans and receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the 

effective interest rate method. 

Cash and cash equivalents 

Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments of a 

maturity of three months or less from the date of acquisition that are readily convertible to a known amount of cash and that are 

subject to an insignificant risk of changes in value. Bank overdrafts are shown within short-term borrowings in current liabilities on 

the statement of financial position. Cash and cash equivalents in the statement of cash flows and in the presentation of net debt 

are reflected net of overdrafts. 

Trade receivables 

Trade receivables are initially recognised at fair value and are subsequently carried at amortised cost using the effective interest rate 

method, less allowance for any impairment as appropriate. 

Trade payables 

Trade payables are initially recognised at fair value and are subsequently carried at amortised cost using the effective interest rate 

method. 

Borrowings 

Interest bearing loans and overdrafts are initially recognised at fair value, net of direct transaction costs. Borrowings are 

subsequently measured at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption 

value is recognised in the income statement over the term of the borrowings using the effective interest rate method. 

Net debt 

Net debt is a non-IFRS measure and consists of short-term, medium and long-term borrowings, bank overdrafts less cash and 

loans to related parties, cash equivalents and current financial asset investments. 



Borrowing costs 

Interest on borrowings directly relating to the acquisition, construction or production of qualifying assets is capitalised until such 

time as the assets are substantially ready for their intended use or sale. Where funds have been borrowed specifically to finance a 

project, the amount capitalised represents the actual borrowing costs incurred. Where the funds used to finance a project form 

part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general 

borrowings of the Group or Company during the construction period. 

All other borrowing costs are recognised in the income statement in the period in which they are incurred. 

Derivative financial instruments and hedge accounting 

The Group and Company enter into forward contracts in order to hedge its exposure to foreign exchange risk. The Group and 

Company do not use derivative financial instruments for speculative purposes. 

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and subsequently held at fair value in 

the statement of financial position within ‘derivative financial instruments’, and, when designated as hedges, are classified as 

current or non-current depending on the maturity of the derivative. Derivatives that are not designated as hedges are classified as 

current, even when their actual maturity is expected to be greater than one year. 

Changes in the fair value of derivative instruments that are not formally designated in hedge relationships are recognised 

immediately in the income statement and are classified within ‘Operating profit’ or ‘Net finance costs’, depending on the type of 

risk that the derivative relates to. 

Cash flow hedges 

The effective portion of changes in the fair value of derivative financial instruments that are designated as hedges of future cash 

flows are recognised directly in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income 

statement. If the cash flow hedge of a forecast transaction results in the recognition of a non-financial asset or a non-financial 

liability then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been 

recognised in the Group’s or Company’s cash flow hedge reserve in equity are included in the initial measurement of the asset or 

liability. For hedges that do not result in the recognition of a non-financial asset or a non-financial liability, amounts deferred in the 

Group’s or Company’s cash flow hedge reserve in equity are recognised in the income statement in the same period in which the 

hedged item affects profit or loss on a proportionate basis. 

Fair value hedges 

For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to 

the risk being hedged with the corresponding entry in the income statement. Gains or losses from remeasuring the associated 

derivative are also recognised in the income statement. 

Ineffective, expired, sold, terminated or exercised hedging instruments 

Hedge accounting is discontinued when the hedge relationship is revoked or the hedging instrument expires or is sold, terminated, 

exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss deferred in equity remains in equity 

and is recognised when the forecast transaction is ultimately recognised in the income statement. If a hedge transaction is no 

longer expected to occur, the net cumulative gain or loss deferred in equity is included immediately in the income statement. 

Equity instruments, share issue costs, treasury shares and dividend payments 

Equity instruments 

An equity instrument is any contract which evidences a residual interest in the net assets of an entity. 

Share issue costs 

Incremental costs directly attributable to the issue of new shares are shown as a deduction, net of applicable tax, from the 

proceeds. An incremental share issue cost is one which would not have arisen if shares had not been issued. 




continued 



Treasury shares 

The purchase by any Group entity of Mondi Limited’s equity instruments results in the recognition of treasury shares. The 

consideration paid is deducted from equity. Where treasury shares are subsequently sold, reissued or otherwise disposed of, any 

consideration received is included in equity attributable to the equity holders of Mondi Limited, net of any directly attributable 

incremental transaction costs and the related tax effects. 

Dividend payments 

Dividend distributions to Mondi Limited’s ordinary equity holders are recognised as a liability in the period in which the dividends 

are declared and approved. Final dividends are accrued when approved by Mondi Limited’s ordinary equity holders at its annual 

general meeting and interim dividends are recognised when approved by the board. 

Special items 

Special items are those items of financial performance that the Group and Company believe should be separately disclosed to 

assist in the understanding of the underlying financial performance achieved by the Group and its businesses. Such items are 

material by nature or amount in relation to the financial year’s results. 

Earnings per share (EPS) 

Basic EPS 

Basic EPS is calculated by dividing net profit attributable to ordinary equity holders of the parent company by the weighted average 

number of ordinary Mondi Limited shares in issue during the year, net of treasury shares. For this purpose, net profit is defined as 

the profit after tax and special items attributable to equity holders of the parent company. 

Diluted EPS 

For diluted EPS, the weighted average number of Mondi Limited ordinary shares in issue, net of treasury shares, is adjusted to 

assume conversion of all dilutive potential ordinary shares, such as share awards granted to employees. Potential or contingent 

share issuances are treated as dilutive when their conversion to shares would decrease net EPS. The effect of anti-dilutive potential 

shares is excluded from the calculation of diluted EPS. 

Underlying and headline EPS 

Underlying EPS excludes the impact of special items and is a non-IFRS measure. It is included to provide an additional basis on 

which to measure the Group’s earnings performance. The presentation of headline EPS is mandated under the JSE Listings 

Requirements and is calculated in accordance with Circular 3/2009, ‘Headline Earnings’, as issued by the South African Institute of 

Chartered Accountants. 

Segmental reporting 

The Group’s operating segments are reported in a manner consistent with the internal reporting provided to the DLC executive 

committee, being the chief operating decision-making body. 



New accounting policies, early adoption and future requirements 

Standards and Interpretations early adopted by the Group 

There were no Standards or Interpretations early adopted by the Group and Company in the current year. 

Standards, amendments to published Standards and Interpretations effective during 2010 

The Group and Company have adopted the following Standards, amendments to published Standards and Interpretations during 

the current year, all of which had no significant impact on the Group’s and Company’s results: 

• IFRS 1 – First-time Adoption of International Financial Reporting Standards 

• IFRS 2 – Share-based Payment 

• IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations 

• IFRS 8 – Operating Segments 

• IAS 1 – Presentation of Financial Statements 

• IAS 7 – Statement of Cash Flows 

• IAS 10 – Events after the Reporting Period 

• IAS 12 – Income Taxes 

• IAS 17 – Leases 

• IAS 18 – Revenue 

• IAS 28 – Investments in Associates 

• IAS 31 – Interests in Joint Ventures 

• IAS 36 – Impairment of Assets 

• IAS 38 – Intangible Assets 

• IAS 39 – Financial Instruments: Recognition and Measurement 

• IFRIC 9 – Reassessment of Embedded Derivatives 

• IFRIC 16 – Hedges of a Net Investment in a Foreign Operation 

• IFRIC 17 – Distributions of Non-cash Assets to Owners 

• IFRIC 18 – Transfers of Assets from Customers 

The Group has adopted IFRS 3, ‘Business Combinations’ (revised 2008), and IAS 27, ‘Consolidated and Separate Financial 

Statements’ (revised 2008). Both Standards became effective for annual reporting periods beginning on or after 1 July 2009. 

The most significant changes, all of which are applied prospectively, to the Group’s previous accounting policies for business 

combinations are as follows: 

• acquisition related costs which previously would have been included in the cost of a business combination are included in 

administrative expenses in the income statement as they are incurred; 

• any pre-existing equity interest in the acquiree is remeasured to fair value at the date of obtaining control (the acquisition date), 

with any resulting gain or loss recognised in profit or loss; 

• any changes in the Group’s ownership interest subsequent to the acquisition date are recognised directly in equity, with no 

adjustment to goodwill; and 

• any changes to the cost of an acquisition, including contingent consideration, resulting from events after the acquisition date are 

recognised in profit or loss. Previously, such changes resulted in an adjustment to goodwill. 

Any adjustments to contingent consideration for acquisitions made prior to 1 January 2010 which result in an adjustment to 

goodwill continue to be accounted for under IFRS 3 (2004) and IAS 27 (2005), for which the accounting policies can be found in 

the Group’s annual financial statements for the year ended 31 December 2009. The application of both revised Standards did not 

have a material impact on the Group’s results. 




continued 



Standards, amendments to published Standards and Interpretations that are not yet effective and have not been early 

adopted by the Group and Company 

The following Standards, amendments to published Standards and Interpretations are not expected to have a significant impact on 

the Group’s and Company’s results in the first year of adoption: 

• IFRS 1 – First-time Adoption of International Financial Reporting Standards 

• IFRS 3 – Business Combinations 

• IFRS 7 – Financial Instruments: Disclosures 

• IAS 1 – Presentation of Financial Statements 

• IAS 21 – The Effects of Changes in Foreign Exchange Rates 

• IAS 24 – Related Party Disclosures 

• IAS 27 – Consolidated and Separate Financial Statements 

• IAS 28 – Investments in Associates 

• IAS 31 – Interests in Joint Ventures 

• IAS 32 – Financial Instruments: Presentation 

• IAS 34 – Interim Financial Reporting 

• IFRIC 13 – Customer Loyalty Programs 

• IFRIC 19 – Extinguishing Financial Liabilities With Equity Instruments 

The Group and Company is in the process of assessing the impact of IFRS 9, ‘Financial Instruments’, on the Group’s and 

Company’s results in the period of initial adoption. This Standard will become effective for annual reporting periods beginning on or 

after 1 January 2013. 

Accounting estimates and critical judgements 

The preparation of the Group’s consolidated financial statements and the Company’s financial statements include the use of 

estimates and assumptions which affect certain items reported in the statement of financial position and the income statement. 

The disclosure of contingent assets and liabilities is also affected by the use of estimation techniques. Although the estimates used 

are based on management’s best knowledge of current circumstances and future events and actions, actual results may differ from 

those estimates. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of 

certain assets and liabilities within the next financial year are disclosed below. 

Estimated residual values and useful economic lives 

The carrying values of certain tangible fixed assets are sensitive to assumptions relating to projected residual values and useful 

economic lives, which determine the depreciable amount and the rate at which capital expenditure is depreciated. The Group and 

Company reassess these assumptions at least annually or more often if there are indications that they require revision. Estimated 

residual values are based on available secondary market prices as at the reporting date unless estimated to be zero. Useful 

economic lives are based on the expected usage, wear and tear, technical or commercial obsolescence and legal limits on the 

usage of capital assets. 

Estimated impairment of goodwill and tangible fixed assets 

The Group assesses annually whether goodwill has suffered any impairment, in accordance with the stated Group accounting 

policy. The recoverable amounts of goodwill allocated to cash-generating units and tangible fixed assets are determined based on 

value-in-use calculations, which require the exercise of management’s judgement across a limited range of input assumptions and 

estimates. The principal assumptions used relate to the time value of money and expected future cash flows. 

The Group and Company assess annually whether there are any indications that items of property, plant and equipment, including 

assets in the course of construction, have suffered any impairment. Indications of impairment are inherently judgemental and may 

require management to assess both internal and external sources of information. 



Fair value of owned forestry assets 

The Group and Company determine the fair value based on the present value of expected net cash flows arising from its owned 

forestry assets, discounted at a current, market determined pre tax rate. Management’s judgement is exercised in determining 

future net cash flows and the discount rate. Future net cash flows are dependent upon inputs including expected selling prices; 

costs of transport, harvesting, extraction and loading (THEL); and the factor used to convert hectares of land under afforestation to 

tonnes of standing timber which in itself is dependent on a variety of environmental factors. Net selling price is selling price after 

deduction of THEL costs. 

Retirement benefits 

The Group’s and Company’s scheme liabilities are sensitive to changes in various underlying actuarial assumptions set by 

management. These assumptions include the discount and inflation rates to apply to scheme liabilities, the mortality rates to apply 

to scheme members, the long-term medical cost trend rates to apply to medical schemes and the rates of increase of future 

salaries. Further details regarding the assumptions are set out in note 23. 

2 Operating segments 

Identification of the Group’s externally reportable operating segments 

The Group’s externally reportable segments reflect the internal reporting structure of the Group, which is the basis on which 

resource allocation decisions are made by management in the attainment of strategic objectives. The Group operates primarily in 

South Africa. This geographic region is further split by product segments reflecting the management of the Group. 

Product revenues 

The material product types from which the Group’s externally reportable segments derive both their internal and external revenues 

are presented as follows: 

Operating segments Internal revenues 1 External revenues 

South Africa Division – Uncoated fine paper – Uncoated fine paper 

– Pulp – Pulp 

– Corrugated products – Corrugated products 

– Woodchips 

Mondi Packaging South Africa – Corrugated products – Corrugated products 

– Recycled fibre – Plastic packaging products 

Note: 

1 

The Group operates a vertically-integrated structure in order to benefit from economies of scale and to more effectively manage the risk of adverse price movements in 

key input costs. Internal revenues are therefore generated across the supply chain. 




continued 


2 Operating segments (continued) 

Measurement of operating segment revenues, profit or loss, assets and non-current non-financial 

assets 

Management has regard to certain operating segment measures in making resource allocation decisions and monitoring segment 

performance. The operating segment measures required to be disclosed adhere to the recognition and measurement criteria 

presented in the Group’s accounting policies. In addition, the Group has presented certain non-IFRS measures by segment to 

supplement the user’s understanding. All inter-group transactions are conducted on an arm’s length basis. 

The Group’s measure of net segment assets includes the allocation of retirement benefits surpluses and deficits on an appropriate 

basis. The measure of segment results exclude, however, the financing effects of the Group’s defined benefit pension plans. 

In addition, the Group’s measure of net segment assets does not include an allocation for derivative assets and liabilities, nonoperating 

receivables and payables and assets held for sale and associated liabilities. The measure of segment results includes 

the effects of certain movements in these unallocated balances. 

The Group’s geographic analysis is presented on the following level: 

• continental; or 

• sub-continental; or 

• by individual country (if greater than 10% of the Group total). 

There has been no change in the basis of measurement of segment profit or loss in the financial year. 

Operating segment revenue 

2010 2009 

Segment Internal External Segment Internal External 

R million revenue revenue 1 revenue 2 revenue revenue 1 revenue 2 

South Africa Division 5,609 (722) 4,887 5,576 (738) 4,838 

Mondi Packaging South Africa 6,258 (163) 6,095 5,774 (193) 5,581 

Corporate & other businesses 743 (8) 735 727 (9) 718 

Segments total 12,610 (893) 11,717 12,077 (940) 11,137 

Inter-segment elimination (893) 893 – (940) 940 – 

Group total 11,717 – 11,717 11,137 – 11,137 

Notes: 

1 

Inter-segment transactions are conducted on an arm’s length basis. 

2 The description of each business segment reflects the nature of the main products they sell. In certain instances the business segments sell minor volumes of other 

products and due to this reason the external segment revenues will not necessarily reconcile to the external revenues by each type of product presented below. 



External revenue by product type 

R million 2010 2009 

Products 

Corrugated products 5,133 4,752 

Uncoated fine paper 2,065 2,467 

Pulp 1,287 729 

Woodchips 560 587 

Other 1 2,672 2,602 

Group total 11,717 11,137 

Note: 

1 Revenues derived from product types that are not individually material in nature are classified as other. 

External revenue by location of customer 


Revenue 

Africa 

South Africa (Country of domicile) 7,880 7,396 

Rest of Africa 1,254 1,045 

Africa total 9,134 8,441 

Western Europe 

Austria 1,305 1,716 

Rest of western Europe 151 162 

Western Europe total 1,456 1,878 

South America 24 19 

Asia and Australia 1,103 799 

Group total 11,717 11,137 

External revenue by location of production 


Revenue 

Africa 

South Africa (Country of domicile) 11,567 11,023 

Rest of Africa 150 114 

Group total 11,717 11,137 

Revenues from one customer of the Uncoated Fine Paper segment and from one customer of the Containerboard segment 

represent approximately R284 million and R966 million, respectively (2009: R710 million and R968 million, respectively) of the 

Group’s total revenues. 




continued 



Operating profit before special items 


South Africa Division 545 395 

Mondi Packaging South Africa 484 406 

Corporate & other businesses (15) (69) 

Segments total 1,014 732 

Special items (see note 4) (104) (171) 

Net income from associates (see note 13) 3 – 

Net finance costs (see note 5) (334) (483) 

Group profit before tax 579 78 

Significant components of operating profit before special items 

Depreciation and amortisation Operating lease charges 

R million 2010 2009 2010 2009 

South Africa Division 506 506 49 54 

Mondi Packaging South Africa 319 307 91 80 

Corporate & other businesses 17 32 15 14 

Group and segments total 842 845 155 148 

Operating segment assets 

2010 2009 

Segment Net segment Segment Net segment 

R million assets 1 assets assets 1 assets 

South Africa Division 9,671 8,448 10,115 8,951 

Mondi Packaging South Africa 4,485 3,482 4,492 3,454 


Inter-segment elimination (223) – (286) – 

Segments total 14,387 12,222 14,739 12,692 

Unallocated: 

Investments in associates 56 56 30 30 

Deferred tax assets/(liabilities) 37 (1,678) 71 (1,639) 

Other non-operating assets/(liabilities) 2 286 (238) 568 (73) 

Group trading capital employed 14,766 10,362 15,408 11,010 

Financial asset investments 137 137 94 94 

Net debt 216 (3,166) 422 (3,866) 

Group assets 15,119 7,333 15,924 7,238 

Notes: 

1 Segment assets are operating assets and as at 31 December 2010 consist of property, plant and equipment of R7,697 million (2009: R8,119 million), intangible assets 

of R649 million (2009: R689 million), forestry assets of R2,838 million (2009: R2,675 million), retirement benefits surplus of R81 million (2009: R83 million), inventories of 

R1,133 million (2009: R1,209 million) and operating receivables of R1,989 million (2009: R1,964 million). 

2 Other non-operating assets consist of derivative assets of R19 million (2009: R7 million), other non-operating receivables of R255 million (2009: R189 million) and assets 

held for sale of R12 million (2009: R372 million). Other non-operating liabilities consist of derivative liabilities of R36 million (2009: R22 million), non-operating provisions 

of R138 million (2009: R111 million), current income tax liabilities of R12 million (2009: R28 million), other non-operating liabilities of R338 million (2009: R387 million) 

and liabilities directly associated with assets classified as held for sale of Rnil (2009: R93 million). 



Non-current non-financial assets 

2010 2009 

Non-current Net Non-current Net 

non-financial Segment segment non-financial Segment segment 

R million assets 1 assets assets assets 1 assets assets 

Africa 

South Africa (Country of domicile) 11,144 14,292 12,156 11,453 14,658 12,640 

Rest of Africa 40 95 66 30 81 52 

Group total 11,184 14,387 12,222 11,483 14,739 12,692 

Note: 

1 

Non-current non-financial assets are non-current assets and consist of property, plant and equipment, intangible assets and forestry assets, but exclude retirement 

benefits surplus, deferred tax assets and non-current financial assets. 

Additions to non-current non-financial assets 

Additions to non-current Capital expenditure 

non-financial assets 1 cash payments 2 

R million 2010 2009 2010 2009 

South Africa Division 687 731 270 300 

Mondi Packaging South Africa 270 194 270 193 


Group and segments total 1,026 990 578 524 

Notes: 

1 Additions to non-current non-financial assets reflect cash payments and accruals in respect of additions to property, plant and equipment, intangible assets and forestry 

assets and include interest capitalised as well as additions resulting from acquisitions through business combinations. Additions to non-current non-financial assets, 

however, exclude additions to deferred tax assets, retirement benefits surplus and non-current financial assets. 

2 Capital expenditure cash payments exclude business combinations, interest capitalised and investments in intangible and forestry assets. 




continued 


3 Operating profit before special items 

Operating profit before special items for the year has been arrived at after (charging)/crediting: 

Group Company 

R million 2010 2009 2010 2009 

Depreciation of property, plant and equipment 

(see note 10) (802) (803) (507) (505) 

Amortisation of intangible assets (see note 9) (40) (42) – – 

Operating lease charges (see note 2) (155) (148) (49) (54) 

Research and development expenditure (23) (22) (5) (5) 

Increase in allowance for impairment of trade 

receivables (see note 17) (7) (5) (5) – 

Foreign currency gains 30 43 26 69 

Fair value (losses)/gains on forward foreign 

exchange contracts (5) 1 – (1) 

Fair value gains on forestry assets (see note 11) 349 323 208 243 

Felling costs (see note 11) (635) (581) (496) (455) 

(Loss)/profit on disposal of tangible and 

intangible assets (2) 53 (4) 53 

Total employee costs (1,939) (1,773) (905) (766) 

Employee costs (1,824) (1,650) (844) (704) 

Defined benefit pension plan costs (30) (34) (21) (21) 

Defined contribution pension plan costs (85) (89) (40) (41) 

Auditors’ remuneration (12) (14) (5) (6) 

Audit fees (11) (11) (4) (4) 

Non-audit fees (1) (3) (1) (2) 

Total revenue, as defined under IAS 18, ‘Revenue’, consisting of revenue, interest income and dividend income was 

R11,779 million and R5,926 million for Group and Company respectively (2009: R11,192 million and R5,879 million respectively). 

Other than depreciation and amortisation, and fair value movements on forestry assets which are disclosed above, there are no 

other significant non-cash items recorded within Group operating profit as stated before operating special items. 


4 Special items 

Group Company 

R million 2010 2009 2010 2009 

Operating special items 

Asset impairments (200) (226) (186) (216) 

Restructuring and closure costs 

Restructuring and closure costs excluding 

related personnel costs (37) (2) (37) (2) 

Personnel costs relating to restructuring (19) (29) (18) (29) 

Proceeds on insurance – 87 – – 

Demerger arrangements – (1) – (1) 

Total operating special items (256) (171) (241) (248) 

Non-operating special items 

Profit on disposals (see note 29) 152 – 152 – 

Total non-operating special items 152 – 152 – 

Total special items before tax and non-controlling 

interests (104) (171) (89) (248) 

Tax (see note 6) 38 60 (13) 70 

Non-controlling interests 1 (16) – – 

Total special items attributable to equity 

holders of the parent company (65) (127) (102) (178) 

Special items before tax and non-controlling interests by operating segment: 


South Africa Division (89) (248) 

Mondi Packaging South Africa (6) 77 

Corporate & other businesses (9) – 

Segments total (104) (171) 

Year ended 31 December 2010 

In South Africa Division, a 120,000 tonne uncoated fine paper machine and related converting capacity in the Merebank plant was 

mothballed in September 2010 and the business restructured. This led to the recognition of an asset impairment of R186 million 

and related restructuring costs of R55 million. The sale of 38,425 hectares of forestry assets realised a gain of R152 million. 

Mondi Packaging South Africa impaired assets at its Versapak Plant of R6 million. 

Underperforming assets in Mondi Shanduka Newsprint have been partially impaired by R8 million. 

Year ended 31 December 2009 

The South Africa Division announced the mothballing of its PM32 paper machine which represents a 120,000 tonne capacity 

reduction. An operating special item of R247 million relating to this machine was recognised of which R216 million related to an 

asset impairment and R31 million related to restructuring and personnel costs. 

Mondi Packaging South Africa received insurance proceeds in excess of net book value of R87 million to replace fire damaged 

assets at one of its subsidiaries, while an impairment of R10 million of the damaged assets was recognised. 

Equity-settled demerger arrangements for senior management have resulted in a fair value charge of R1 million for the Group and 

R1 million for the Company. 

Group 




continued 


5 Net finance (costs)/income 

Net finance (costs)/income and related foreign exchange gains are presented below: 

Group Company 

R million 2010 2009 2010 2009 

Investment income 

Interest income 

Bank deposits, loan receivables and other 62 54 320 310 

Past due receivables – 1 – 1 

Total interest income 62 55 320 311 

Expected return on defined benefit arrangements 

(see note 23) 179 128 160 111 

Impairment of financial assets (excluding trade 

receivables) (see note 15) (3) (2) – (4) 

Fair value gains 12 – – – 

Total investment income 250 181 480 418 

Financing costs 

Interest expense 

Interest on bank overdrafts and loans (381) (508) (234) (282) 

Interest on obligations under finance leases (6) (3) (2) (2) 

Interest on defined benefit arrangements 

(see note 23) (197) (153) (177) (133) 

Total financing costs (584) (664) (413) (417) 

Net finance (costs)/income (334) (483) 67 1 

6 Tax charge 

(a) Analysis of charge for the year from continuing operations 

Group Company 

R million 2010 2009 2010 2009 

South African corporation tax at 28% (2009: 28%) 30 42 – – 

Secondary Tax on Companies at 10% (2009: 10%) 17 14 16 13 

Current tax (excluding tax on special items) 47 56 16 13 

Deferred tax in respect of the current period 

(excluding tax on special items) 166 38 118 61 

Deferred tax asset impairment 4 56 – – 

Deferred tax in respect of prior period 

(under)/over provision (20) 33 (33) 24 

Total tax charge before special items 197 183 101 98 

Deferred tax on special items (see note 4) (38) (60) 13 (70) 

Total tax charge 159 123 114 28 


6 Tax charge (continued) 

(b) Factors affecting tax charge for the year 

The Group’s and Company’s effective rates of tax before special items for the year ended 31 December 2010, calculated on profit 

before tax before special items and including net income from associates, are 29% and 24% respectively (2009: 73% and 43% 

respectively). 

The Company has an estimated tax loss of R267 million (2009: R949 million). 

The Group’s and Company’s total tax charges for the year can be reconciled to the tax on the Group’s and Company’s profit/(loss) 

before tax at the South African corporation tax rate of 28% (2009: 28%), as follows: 

Group Company 

R million 2010 2009 2010 2009 


Tax on profit/(loss) before tax calculated at the 

South African corporation tax rate of 28% 

(2009: 28%) 162 22 94 (5) 

Tax effects of: 

Expenses not (taxable)/deductible for tax 

purposes (5) 10 36 7 

Intangible amortisation and non-qualifying 

depreciation 19 4 – 4 

Special items not (taxable)/deductible (31) – 38 – 

Other non-deductible expenses 7 6 (2) 3 

Non-taxable income (1) (21) – (11) 

Profits and losses on disposals – (11) – (11) 

Other non-taxable income (1) (10) – – 

Temporary difference adjustments (15) 97 (33) 24 

Current year tax losses and other temporary 

differences not recognised 1 8 – – 

Impairment of deferred tax asset previously 

recognised 4 56 – – 

Prior period tax losses and other temporary 

differences not previously recognised (20) 33 (33) 24 

Other adjustments 18 15 17 13 

Secondary Tax on Companies 17 14 16 13 

Other adjustments 1 1 1 – 

Tax charge for the year 159 123 114 28 

IAS 1 requires income from associates to be presented net of tax on the face of the income statement. The Group’s share of its 

associates’ tax is therefore not presented within the Group’s total tax charge. The associates’ tax charge included within ‘Net 

income from associates’ for the year ended 31 December 2010 is R1 million (2009: Rnil). 




continued 


7 Earnings per share 

R cents per share 2010 2009 

Profit/(loss) for the financial year attributable to equity holders of the parent company 

Basic EPS 247.6 (51.8) 

Diluted EPS 247.6 (51.8) 3 

Underlying earnings for the financial year 1 

Basic EPS 291.8 34.7 

Diluted EPS 291.8 34.4 

Headline earnings/(loss) for the financial year 2 

Basic EPS 266.0 (3.4) 

Diluted EPS 266.0 (3.4) 3 

Notes: 

1 

Underlying EPS excludes the impact of special items. 

2 

The presentation of headline EPS is mandated under the JSE Listings Requirements. Headline earnings has been calculated in accordance with Circular 3/2009, 

‘Headline Earnings’, as issued by the South African Institute of Chartered Accountants. 

3 

Diluted EPS is consistent with basic EPS as the impact of potential ordinary shares is anti-dilutive. 

The calculation of basic and diluted EPS, basic and diluted underlying EPS, and basic and diluted headline EPS is based on the 

following data: 

Group 

Earnings 


Profit/(loss) for the financial year attributable to equity holders of the parent company 364 (76) 

Special items (see note 4) 104 171 

Related tax (see note 4) (38) (60) 

Related non-controlling interests (see note 4) (1) 16 

Underlying earnings for the financial year 429 51 

Loss/(profit) on disposal of tangible and intangible assets (see note 3) 2 (53) 

Special items: demerger arrangements (see note 4) – (1) 

Special items: restructuring and closure costs (see note 4) (56) (31) 

Impairments not included in special items (see note 10) – 5 

Related tax 16 24 

Headline earnings/(loss) for the financial year 391 (5) 

Number of shares 

million 2010 2009 

Basic number of ordinary shares outstanding 1 147 147 

Effect of dilutive potential ordinary shares 2 – 1 

Diluted number of ordinary shares outstanding 147 148 

Notes: 

1 

The basic number of ordinary shares outstanding represents the weighted average number in issue for the Company for the year, as adjusted for the weighted average 

number of treasury shares held during the year. 

2 

Diluted EPS is calculated by adjusting the weighted average number of ordinary shares in issue, net of treasury shares, on the assumption of conversion of all potentially 

dilutive ordinary shares. 


8 Dividends 

Dividends paid to the equity holders of the Company are presented below: 

Group Company 

R million 2010 2009 2010 2009 

Interim dividend paid 49 42 49 42 

Final dividend paid (in respect of prior year) 108 93 108 93 

Final dividend proposed for the year 

ended 31 December 1 237 108 237 108 

Paid to non-controlling interests 7 4 – – 

Note: 

1 The dividend proposed is subject to approval by shareholders at the annual general meeting of Mondi Limited scheduled for 5 May 2011 and therefore this dividend and 

the related STC have not been included as a liability in the Group’s consolidated statement of financial position and in the Company’s statement of financial position. 

Company 

R cents per share 2010 2009 

Interim dividend paid 33.4 28.4 

Final dividend paid (in respect of prior year) 73.5 63.3 

Final dividend proposed for the year ended 31 December 161.3 73.5 

9 Intangible assets 

Group 1 

Licences and 

2010/R million Goodwill other intangibles 2 Total 

Cost 

At 1 January 580 211 791 

At 31 December 580 211 791 

Accumulated amortisation and impairment 

At 1 January – 102 102 

Charge for the year – 40 40 

At 31 December – 142 142 

Net book value as at 31 December 580 69 649 

Notes: 

1 

There are no intangible assets in the Company. 

2 

Licences and other intangibles mainly relate to software development costs, and customer relationships and contractual arrangements capitalised as a result of business 

combinations. 




continued 


9 Intangible assets (continued) 

Group 1 

Licences and 

2009/R million Goodwill other intangibles 2 Total 

Cost 

At 1 January 581 211 792 

Disposal of businesses (see note 29) (1) – (1) 

At 31 December 580 211 791 

Accumulated amortisation and impairment 

At 1 January – 60 60 

Charge for the year – 42 42 

At 31 December – 102 102 

Net book value as at 31 December 580 109 689 

Notes: 

1 

There are no intangible assets in the Company. 

2 

Licences and other intangibles mainly relate to software development costs, and customer relationships and contractual arrangements capitalised as a result of business 

combinations. 

Impairment tests for goodwill 

Goodwill is allocated for impairment testing purposes to cash-generating units (CGUs) which reflect how it is monitored for internal 

management purposes. 

The recoverable amount of a CGU is determined based on value-in-use calculations. Value-in-use calculations use cash flow 

projections based on financial budgets covering a three year period that are based on the latest forecasts for revenue and cost as 

approved by the board. Cash flow projections beyond three years are based on internal management forecasts and assume a 

growth rate not exceeding gross domestic product. Zero percent growth rates are assumed in perpetuity given the commodity 

nature of the majority of the products (i.e. volume growth is assumed to be offset by real price declines). Post tax cash flow 

projections are discounted using a post tax discount rate of 8.1% (2009: 10.3%), as adjusted for the economic and political risks 

of South Africa that are not reflected in the underlying cash flows. Perpetuity maintenance capital expenditure has been assumed 

at 60% of depreciation. 

Expected future cash flows are inherently uncertain and could change materially over time. They are significantly affected by a 

number of factors, including market and production estimates, together with economic factors such as prices, discount rates, 

currency exchange rates, estimates of production costs and future capital expenditure. In respect of the CGUs that have not been 

impaired, sensitivity analyses of a 1% increase in discount rate or a 1% decrease in cash flows were performed and these did not 

give rise to an impairment. 

No impairment in the CGUs have been recorded and management have applied prudent estimates in the value-in-use calculations, 

which still reflect sufficient headroom above the capital employed of these CGUs. 


9 Intangible assets (continued) 

Carrying value of goodwill at the reporting dates is as follows: 


Mondi Packaging South Africa 580 580 

Total goodwill 580 580 

10 Property, plant and equipment 

Land and Plant and 

2010/R million buildings equipment Other 1 Total 

Cost 

At 1 January 1,052 11,932 734 13,718 

Additions 12 196 370 578 

Disposal of assets (1) (23) (10) (34) 

Transferred to/(from) capital work in progress 34 256 (290) – 

Reclassification from/(to) assets held for sale 

(see note 30) 6 (1) (4) 1 

Other reclassifications – 6 (2) 4 

At 31 December 1,103 12,366 798 14,267 

Accumulated depreciation 

At 1 January 272 4,998 329 5,599 

Charge for the year 32 722 48 802 

Impairment loss recognised 2 3 197 – 200 

Disposal of assets – (22) (9) (31) 

At 31 December 307 5,895 368 6,570 

Net book value as at 31 December 796 6,471 430 7,697 

Notes: 

1 

Other includes R317 million (2009: R302 million) of assets in the course of construction, which are not yet being depreciated in accordance with the accounting policy 

set out in note 1. 

2 

Impairments include R200 million (2009: R220 million) asset impairments reflected in operating special items and Rnil (2009: R5 million) of other impairments. 

Group 




continued 


10 Property, plant and equipment (continued) 


2009/R million buildings equipment Other Total 

Cost 

At 1 January 970 11,338 1,014 13,322 

Acquired through business combinations (see note 28) – 1 – 1 

Additions 5 155 364 524 


Disposal of businesses (see note 29) – (1) (1) (2) 


Reclassification to assets held for sale (see note 30) (45) (2) (6) (53) 

Other reclassifications 8 (1) (5) 2 

At 31 December 1,052 11,932 734 13,718 


At 1 January 247 4,098 305 4,650 


Impairment loss recognised 1 220 4 225 


Disposal of businesses (see note 29) – (1) – (1) 


Other reclassifications – (7) 9 2 

At 31 December 272 4,998 329 5,599 


The net book value and depreciation charges relating to assets held under finance leases amount to R69 million (2009: R47 million) 

and R19 million (2009: R14 million), respectively. 

The Group has pledged property, plant and equipment with a net book value of R1,930 million (2009: R2,221 million) as security 

for certain long-term borrowings (see note 19). 

The net book value of land and buildings comprises: 


Freehold 777 757 

Leasehold – long 13 15 

Leasehold – short (less than 50 years) 6 8 

Total land and buildings 796 780 


Group


Company 


2010/R million buildings equipment Other 1 Total 

Cost 

At 1 January 791 8,604 410 9,805 

Additions – – 269 269 




(see note 30) 6 (1) (4) 1 

At 31 December 830 8,800 435 10,065 


At 1 January 210 3,362 156 3,728 


Impairment loss recognised 2 3 183 – 186 


At 31 December 232 4,005 175 4,412 


Notes: 

1 

Other includes R191 million (2009: R199 million) of assets in the course of construction, which are not yet being depreciated in accordance with the accounting policy 

set out in note 1. 

2 

Impairments include R186 million (2009: R210 million) asset impairments reflected in operating special items. 

Company 


2009/R million buildings equipment Other Total 

Cost 

At 1 January 722 8,128 736 9,586 

Additions – 20 282 302 




At 31 December 791 8,604 410 9,805 


At 1 January 198 2,696 157 3,051 


Impairment loss recognised 1 209 – 210 

Disposal of assets – – (23) (23) 


Other reclassifications – (7) 7 – 

At 31 December 210 3,362 156 3,728 





continued 



The net book value and depreciation charges relating to assets held under finance leases amount to R14 million (2009: R18 million) 

and R4 million (2009: R3 million), respectively. 

The net book value of land and buildings comprises: 


Freehold 592 573 

Leasehold – long – – 

Leasehold – short (less than 50 years) 6 8 

Total land and buildings 598 581 

A register of South African land and buildings and of leased assets is open for inspection upon prior arrangement at the registered 

office of Mondi Limited. 

11 Forestry assets 

Group Company 

R million 2010 2009 2010 2009 

At 1 January 2,675 2,801 2,007 2,160 

Capitalised expenditure 429 434 362 361 

Acquisition of assets 19 31 19 31 

Fair value gains 1 349 323 208 243 

Felling costs (635) (581) (496) (455) 


(see note 30) 1 (333) 1 (333) 

At 31 December 2,838 2,675 2,101 2,007 

Note: 

1 Forestry assets are revalued to fair value less estimated costs to sell each reporting year in accordance with the accounting policy set out in note 1. The fair value is 

calculated on the basis of future expected cash flows discounted using a discount rate based on a pre tax real yield on long-term bonds over the last five years. 

Forestry assets comprise forests with the maturity profile disclosed in the table below: 

Group Company 

R million 2010 2009 2010 2009 

Mature 1,296 1,260 950 1,004 

Immature 1,542 1,415 1,151 1,003 

Total forestry assets 2,838 2,675 2,101 2,007 

Mature forestry assets are those plantations that are harvestable, while immature forestry assets have not yet reached that stage of 

growth. Plantations are considered harvestable after a specific age depending on the species planted and regional considerations. 


12 Investments in subsidiaries 

Company 


Unlisted 

Shares at cost 255 255 

Loans advanced 2,219 2,057 

Total investments in subsidiaries 2,474 2,312 

Repayable within one year classified as current asset (77) (74) 

Total long-term investments in subsidiaries 2,397 2,238 

Mondi Packaging South Africa (Proprietary) Limited (MPSA) 

As part of the BBBEE transaction, a Mezzanine loan agreement was entered into between the Company and MPSA. The 

Mezzanine loan of R700 million that was advanced by the Company to MPSA during 2005 was repaid in 2007 and refinanced by 

an external loan with Standard Bank. This loan with Standard Bank incurred interest at the three month JIBAR plus 60 basis points 

and is repayable in 11 quarterly payments that commenced 2 January 2008. Operating cash flow requirements are and will be met 

by a Mezzanine loan 1 facility with the Company of R900 million, of which R804 million (2009: R788 million) has been utilised. The 

Company advanced a further R1,099 million (2009: R956 million) to MPSA (including interest) on a Mezzanine loan 2 facility of 

R1 billion. The Mezzanine loan 1 facility incurs interest at the three month JIBAR plus 450 basis points and the Mezzanine loan 2 

facility incurs interest at prime plus 400 basis points. These loans are repayable subject to the covenants imposed by Standard 

Bank and by the 12th anniversary of the transaction date, being 1 January 2017. 

Furthermore, the Company advanced a shareholder’s loan to MPSA of R102 million in 2006 with a further loan of R137 million 

being advanced by the Company during 2007. The total loan of R239 million (2009: R239 million) is unsecured, interest free and is 

only repayable once the external loan repayable to Standard Bank and the Mezzanine loans have been settled in full. The Standard 

Bank loan will be settled by drawing upon the Mezzanine loan 1 facility with the Company. As the Mezzanine loan facilities are 

available until January 2017, the shareholder’s loan is considered to be only repayable in January 2017. 

The Mezzanine loans and shareholder’s loan to MPSA have been subordinated to the benefit of creditors of MPSA and its 

subsidiaries. 

Mondi Zimele (Proprietary) Limited (Mondi Zimele) 

The closing balance of the loan advanced by the Company to Mondi Zimele amounts to R30 million (2009: R28 million), which is 

net of an impairment raised of R5 million (2009: R5 million). This loan is interest free and is repayable on liquidation of Mondi Zimele 

or earlier on demand by the Company. The total loan facility available to Mondi Zimele over a three year period amounts to a 

maximum value of R70 million. 

Details of principal subsidiary companies are set out in note 38. 




continued 


13 Investments in associates 


At 1 January 30 31 

Net income from associates 3 – 

Dividends received – (1) 

Investment in associates 20 – 

Other 3 – 

At 31 December 56 30 

The Group’s total investment in associates comprises: 


Equity 1 56 30 

Total investments in associates 56 30 

Note: 

1 As at 31 December 2010, there is R15 million of goodwill in respect of associates (2009: R5.5 million). 

Group 

The Group’s share of the summarised financial information of principal associates, all of which are unlisted, is as follows: 


Total non-current assets 20 12 

Total current assets 72 41 

Total current liabilities (20) (11) 

Total non-current liabilities (21) (12) 

Share of associates’ net assets (including share of losses) 51 30 

Unrecognised losses in associates 5 – 

Share of associates’ net assets 1 56 30 

Total revenue 167 101 

Total operating costs (163) (101) 

Income tax expense (1) – 

Share of associates’ profit for the financial year 3 – 

Note: 

1 There are no material contingent liabilities for which the Group is jointly or severally liable at the reporting dates presented. 

14 Investments in joint ventures 

Company 


Mondi Shanduka Newsprint (Proprietary) Limited (MSN) 

Shareholder’s loan 128 128 

Mezzanine loan 240 121 

Total investments in joint ventures 368 249 

Repayable within one year classified as current asset – – 

Total long-term investments in joint ventures 368 249 


14 Investments in joint ventures (continued) 

The shareholder’s loan is unsecured and interest free. The shareholder’s loan is only repayable once the Mezzanine loan is settled 

in full and upon the Mezzanine facility of R330 million ending in January 2017. Should the Mezzanine loan not be repaid in 

January 2017, the shareholder would have the option to convert the loan into equity. The Mezzanine loan facility incurs interest 

at the six month JIBAR plus 300 basis points. 

The Group’s share of the summarised financial information of joint venture entities that are proportionately consolidated in the 

Group’s consolidated financial statements is presented as follows: 


Total non-current assets 329 559 

Total current assets 280 274 

Total current liabilities (272) (283) 

Total non-current liabilities 1 (350) (374) 

Share of joint venture entities’ net (liabilities)/assets, proportionately consolidated 2 (13) 176 

Revenue 794 767 

Total operating costs (724) (688) 

Special items (9) (8) 

Net finance costs (21) (28) 

Income tax credit/(expense) 37 (18) 

Share of joint venture entities’ profit for the financial year 77 25 

Notes: 

1 

Included in total non-current liabilities is a deferred tax liability of R35 million (2009: R74 million). 

2 There are no material contingent liabilities at the reporting dates presented. There are capital commitments of R12 million (2009: R23 million) at the reporting date. 

Details of principal joint ventures are set out in note 38. 

15 Financial asset investments 

Group 

2010 2009 

Loans Available- Loans Availableand 

for-sale and for-sale 

R million receivables investments Total receivables investments Total 

At 1 January 81 13 94 44 4 48 

Impairment (3) – (3) (2) – (2) 

Additions 10 – 10 – 9 9 

Repayments from related parties (7) – (7) (14) – (14) 

Repayments – other (1) – (1) (9) – (9) 

Advances 50 – 50 62 – 62 

Reclassifications 7 (13) (6) – – – 

At 31 December 137 – 137 81 13 94 

Current 4 – 4 – – – 

Non-current 133 – 133 81 13 94 




continued 


15 Financial asset investments (continued) 

Company 

2010 2009 

Loans Available- Loans Availableand 

for-sale and for-sale 

R million receivables investments Total receivables investments Total 

At 1 January 133 2 135 128 – 128 

Interest accrued 19 – 19 18 – 18 

Impairment reversal – – – 2 – 2 

Additions 4 20 24 – 8 8 

Repayments – other – – – (9) – (9) 

Disposal of assets – (4) (4) – (12) (12) 

Reclassifications – – – (6) 6 – 

At 31 December 156 18 174 133 2 135 

Current 4 18 22 – – – 

Non-current 152 – 152 133 2 135 

The fair values of available-for-sale investments represent the published prices of the securities concerned. Loans and receivables 

are held at amortised cost. 

Available-for-sale investments 

The Company advanced to the Mondi Incentive Schemes Trust (MIS) a further R19.9 million during 2010 (2009: R8.2 million) to 

fund the purchase of Mondi Limited shares awarded to senior management. Shares vested during 2010 to the value of 

R3.8 million (2009: R11.7 million), which increased the investment in the MIS to R18 million (2009: R2 million). 

Loans and receivables 

The Company advanced a loan to Upper Edge Products (Proprietary) Limited of R8.5 million in 2007, which earns interest at the 

three month JIBAR rate plus 75 basis points and is repayable in three annual instalments of R2.8 million commencing on 

19 December 2011 with a final payment falling due on 19 December 2013. The interest is payable every quarter. 

A loan of R142 million was advanced by the Company to Mondi Packaging South Africa (Proprietary) Limited in 2007 to finance 

the purchase of the Paperlink business from the Company. R42 million was repaid in 2008, with repayment of the remaining 

R100 million as free cash flow is available, which is only expected to be after one year. The loan bears interest at JIBAR plus 

60 basis points and accrued interest amounts to R43 million. 


16 Inventories 

Group Company 

R million 2010 2009 2010 2009 

Valued using first-in-first-out cost formula 

Raw materials and consumables 489 509 168 147 

Work in progress 65 63 41 40 

Finished products 282 306 71 128 

Total valued using first-in-first-out cost formula 836 878 280 315 

Valued using the weighted average cost formula 

Raw materials and consumables 214 245 93 160 

Work in progress 8 11 – – 

Finished products 75 75 – – 

Total valued using the weighted average 

cost formula 297 331 93 160 

Total inventories 1,133 1,209 373 475 

Of which, held at net realisable value 31 62 11 33 

Group Company 

R million 2010 2009 2010 2009 

Income statements 

Write-downs of inventories to net realisable value 63 26 50 6 

Aggregate reversal of previous write-downs 

of inventories (18) – – – 

Cost of inventories recognised as expense 4,603 4,965 2,190 2,400 

17 Trade and other receivables 

Group Company 

R million 2010 2009 2010 2009 

Trade receivables (a) 1,997 1,982 1,062 1,076 

Allowance for doubtful debts (b) (31) (39) (6) (9) 

Net trade receivables 1,966 1,943 1,056 1,067 

Other receivables 255 189 118 88 

Prepayments and accrued income 23 21 9 5 

Total trade and other receivables 2,244 2,153 1,183 1,160 

The fair values of trade and other receivables approximate the carrying values presented. 




continued 


17 Trade and other receivables (continued) 

(a) Trade receivables: credit risk 

The Group’s and Company’s exposure to the credit risk inherent in its trade receivables and the associated risk management 

techniques that the Group and Company deploy in order to mitigate this risk are discussed in note 36. Credit periods offered to 

customers vary according to the credit risk profiles of, and invoicing conventions established by participants operating in, the 

various markets in which the Group and Company operate. Interest is charged at appropriate market rates on balances which are 

considered overdue in the relevant market. 

To the extent that recoverable amounts are estimated to be less than their associated carrying values, impairment charges have 

been recorded in the income statement and the carrying values have been written down to their recoverable amounts. The total 

gross carrying value of these impaired trade receivables for the Group and the Company as at the reporting date are R45 million 

(2009: R58 million) and R15 million (2009: R23 million), respectively, and the associated aggregate impairments are R31 million 

(2009: R39 million) and R6 million (2009: R9 million) for the Group and Company, respectively. 

Included within the Group’s and Company’s aggregate trade receivables balance are specific debtor balances with customers 

totalling R222 million (2009: R266 million) and R16 million (2009: R82 million), respectively, which are past due but not impaired as 

at the reporting date. The Group and Company have assessed these balances for recoverability and believe that their credit quality 

remains intact. An ageing analysis of these past due trade receivables is provided as follows: 

Group 

Trade receivables past due by 

Less than More than 

R million 1 month 1–2 months 2–3 months 3 months Total 

Carrying value as at 

31 December 2010 111 40 23 48 222 


31 December 2009 109 64 46 47 266 

Company 

Trade receivables past due by 

Less than More than 

R million 1 month 1–2 months 2–3 months 3 months Total 


31 December 2010 7 4 4 1 16 


31 December 2009 29 25 17 11 82 

Included within the Group’s and Company’s aggregate trade receivables balances are debtor balances with customers totalling 

R2 million (2009: R18 million) and Rnil (2009: R5 million), respectively, where contractual terms have been renegotiated to extend 

the credit period offered. The Group and Company believe that these balances are fully recoverable and therefore no impairment 

loss has been recognised. 

The Group and Company do not enter into debt factoring arrangements. 


17 Trade and other receivables (continued) 

(b) Movement in the allowance account for bad and doubtful debts 

Group Company 

R million 2010 2009 2010 2009 

At 1 January 39 43 9 13 

Amounts written off and recovered during the year (10) (9) (3) (4) 

Increase in allowance recognised in the income 

statement 7 5 5 – 

Reclassification (5) – (5) – 

At 31 December 31 39 6 9 

18 Trade and other payables 

Group Company 

R million 2010 2009 2010 2009 

Trade payables 761 655 352 281 

Other payables 205 212 34 47 

Accruals and deferred income 655 861 357 493 

Total trade and other payables 1,621 1,728 743 821 

The fair values of trade and other payables approximate the carrying values presented. 

19 Borrowings 

Group 

2010 2009 

R million Current Non-current Total Current Non-current Total 

Secured 

Bank loans and overdrafts 194 1,111 1,305 388 1,300 1,688 

Obligations under finance leases 16 33 49 17 45 62 

Total secured 210 1,144 1,354 405 1,345 1,750 

Unsecured 

Bank loans and overdrafts 1,603 288 1,891 1,142 1,256 2,398 

Other loans 1 2 135 137 2 138 140 

Total unsecured 1,605 423 2,028 1,144 1,394 2,538 

Total borrowings 1,815 1,567 3,382 1,549 2,739 4,288 

Note: 

1 

Includes loans to related parties of R100 million (2009: R100 million). 




continued 


19 Borrowings (continued) 

Company 

2010 2009 

R million Current Non-current Total Current Non-current Total 

Secured 

Obligations under finance leases 4 10 14 4 14 18 

Total secured 4 10 14 4 14 18 

Unsecured 

Bank loans and overdrafts 1,603 289 1,892 1,085 1,256 2,341 

Other loans 112 – 112 93 – 93 

Total unsecured 1,715 289 2,004 1,178 1,256 2,434 

Total borrowings 1,719 299 2,018 1,182 1,270 2,452 

Included in Group borrowings is fixed rate debt with a carrying value of R9 million (2009: R511 million) and a fair value of 

R9 million (2009: R520 million). The maturity analysis of the Group’s and Company’s borrowings, presented on an undiscounted 

future cash flow basis, is included as part of a review of the Group’s and Company’s liquidity risk within note 36. 

Included in borrowings of the Group and Company are two revolving loans of R500 million each (2009: R500 million each). These 

loans are repayable on their maturity dates of 17 June 2011 and 23 July 2011 and bear interest at one month JIBAR plus different 

margins, payable monthly. 

The Group and Company also have amortising term loans of R101 million (2009: R80 million). Capital and interest repayments on 

these loans are payable quarterly in arrears. These loans bear interest at three month JIBAR plus various margins and mature on 

30 June 2012. 

Included in other loans of the Company is a loan of R101 million (2009: R80 million) from Siyaqhubeka Forests (Proprietary) Limited 

(SQF), a subsidiary of Mondi Limited. The loan is divided into two portions, a fixed deposit portion earning interest at the Standard 

Bank three month fixed deposit rate plus 100 basis points and a call amount earning interest at the Standard Bank call deposit 

rate plus 100 basis points. The loan is repayable upon request from SQF with 24 hour notice on the call amount and upon maturity 

of the fixed deposit amount. 

Obligations under finance leases 

The maturity of obligations under finance leases is: 

Group Company 

R million 2010 2009 2010 2009 

Not later than one year 21 23 5 6 

Later than one year but not later than five years 34 51 12 17 

Later than five years 5 5 – – 

Future value of finance lease liabilities 60 79 17 23 

Future finance charges (11) (17) (3) (5) 

Present value of finance lease liabilities 49 62 14 18 


19 Borrowings (continued) 

The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate 

that is available to the Group and Company for similar financial instruments. 

The Group and Company have pledged certain assets as collateral against certain borrowings. The fair values of these assets as at 

31 December are as follows: 

Group Company 

R million 2010 2009 2010 2009 

Assets held under finance leases 

Property, plant and equipment 69 47 14 18 

Assets pledged as collateral for other borrowings 

Property, plant and equipment 1,930 2,221 – – 

Inventories 700 737 – – 

Financial assets 1,431 1,715 – – 

Other 181 165 – – 

Total value of assets pledged as collateral 4,311 4,885 14 18 

The Group is entitled to receive all cash flows from these pledged assets. Further, there is no obligation to remit these cash flows 

to another entity. 

Borrowing capacity 

Group 

2010 2009 

Maximum Maximum 

R million permissible Actual permissible Actual 

Medium and long-term borrowings 1,567 2,739 

Short-term borrowings 1,815 1,549 

Contingent liabilities (see note 33) 98 84 

Total borrowing capacity 17,445 3,480 17,315 4,372 

The maximum borrowing limit as determined by the Articles of Association of Mondi Limited is 2.5 times the equity of the Group 

and is not affected by the deed poll guarantee given by Mondi Limited and entering into a revolving credit facility agreement with 

Mondi plc and other banks and financial institutions. 




continued 


20 Derivative financial instruments 

Group 

2010 2009 

Notional Notional 

R million Asset Liability amount Asset Liability amount 

Current derivatives 

Held for trading 

Foreign exchange contracts 19 (9) 521 7 (3) 562 

Total current derivative financial instruments 19 (9) 521 7 (3) 562 

Non-current derivatives 

Cash flow hedges 

Interest rate swaps 1 – (27) 400 – (19) 500 

Total non-current derivative financial 

instruments – (27) 400 – (19) 500 

Company 

2010 2009 

Notional Notional 

R million Asset Liability amount Asset Liability amount 

Current derivatives 

Held for trading 

Foreign exchange contracts 17 (2) 421 3 (1) 401 

Total current derivative financial instruments 17 (2) 421 3 (1) 401 

Note: 

1 The Group entered into a R400 million (2009: R500 million) interest rate swap to hedge its interest rate exposure on floating rate debt and applied hedge accounting in 

terms of IAS 39. The floating rate of the swap is referenced to three month JIBAR and the fixed interest rate on the R200 million (2009: R300 million) term facility is 

10.1% (2009: 10.1%) and 9.8% (2009: 9.8%) on the R200 million (2009: R200 million) bullet facility. 

Derivative financial instruments are held at fair value. Appropriate valuation methodologies are employed to measure the fair value 

of derivative financial instruments. 

The notional amounts presented represent the aggregate face value of all foreign exchange contracts and interest rate swaps 

outstanding at the reporting date. They do not indicate the contractual future cash flows of the derivative instruments held or their 

current fair value and therefore do not indicate the Group’s and Company’s exposure to credit or market risks. Note 36 provides an 

overview of the Group’s and Company’s management of financial risks through the selective use of derivative financial instruments 

and also includes a presentation of the undiscounted future contractual cash flows of the derivative contracts outstanding at the 

reporting date. 


21 Provisions 

Group Company 

R million 2010 2009 2010 2009 

At 1 January 113 133 90 112 

Charged to income statement 1 104 51 82 45 

Reclassification to assets held for sale (see note 30) – (2) – (2) 

Reclassification to receivables (8) – – – 

Released to income statement (10) – (10) – 

Amounts applied (57) (69) (52) (65) 

At 31 December 142 113 110 90 

Note: 

1 Net of unwound discounts. 

Provisions mainly consist of provisions for an employee ownership plan and bonus provisions. 

Maturity analysis of total provisions on a discounted basis: 

Group Company 

R million 2010 2009 2010 2009 

Current 110 65 83 59 

Non-current 32 48 27 31 

Total provisions 142 113 110 90 

Non-current provisions are discounted using a discount rate based on a pre tax real yield on long-term bonds over the last five 

years. 

22 Deferred tax 

Deferred tax assets 

Group Company 

R million 2010 2009 2010 2009 

At 1 January 71 139 – – 

Charged to the income statement (45) (77) – – 

Credited/(charged) to the statement of 

comprehensive income 11 (4) – – 

Reclassifications – 13 – – 

At 31 December 37 71 – – 




continued 


22 Deferred tax (continued) 

Deferred tax liabilities 

Group Company 

R million 2010 2009 2010 2009 

At 1 January (1,710) (1,779) (1,429) (1,485) 

(Charged)/credited to the income statement (67) 10 (98) (15) 

Credited/(charged) to the statement of 

comprehensive income 56 (21) 54 (21) 

Credited to retained earnings 6 – 6 – 

Disposal of businesses (see note 29) – (2) – – 

Business restructuring 1 – – (1) – 

Reclassification to assets held for sale (see note 30) – 91 – 91 

Reclassifications – (9) – 1 

At 31 December (1,715) (1,710) (1,468) (1,429) 

Note: 

1 Deferred tax on the transfer of employees and related obligations from Mondi Shanduka Newsprint (Proprietary) Limited to Mondi Limited (see note 23). 

The amount of deferred tax provided in the accounts is presented as follows: 

Group Company 

R million 2010 2009 2010 2009 


Tax losses 1 313 342 – – 

Other temporary differences (276) (271) – – 

Total deferred tax assets 37 71 – – 


Capital allowances in excess of depreciation (1,164) (1,317) (1,145) (1,252) 

Fair value adjustments (812) (768) (578) (554) 

Tax losses 94 283 75 265 

Other temporary differences 167 92 180 112 

Total deferred tax liabilities (1,715) (1,710) (1,468) (1,429) 

Note: 

1 Based on forecast data, the Group believes that there will be sufficient future taxable profits available to utilise these tax losses. 

The amount of deferred tax charged/(credited) to the income statement is presented as follows: 

Group Company 

R million 2010 2009 2010 2009 

Capital allowances in excess of depreciation (131) 165 (107) (28) 

Fair value adjustments 43 60 23 52 

Tax losses 218 52 190 14 

Other temporary differences (18) (210) (8) (23) 

Total charge 112 67 98 15 


22 Deferred tax (continued) 

The current expectation regarding the maturity of deferred tax balances is: 

Group Company 

R million 2010 2009 2010 2009 


Recoverable within 12 months – 14 – – 

Recoverable after 12 months 37 57 – – 

Total deferred tax assets 37 71 – – 


Payable within 12 months – (6) – – 

Payable after 12 months (1,715) (1,704) (1,468) (1,429) 

Total deferred tax liabilities (1,715) (1,710) (1,468) (1,429) 

The Group has unrecognised tax losses, as at 31 December 2010, of R246 million (2009: R246 million) that have no expiry date. In 

addition, the Group has unrecognised other timing differences of R16 million (2009: Rnil). The Company does not have any 

amounts in respect of which no deferred tax asset has been recognised due to the unpredictability of future profit streams or gains 

against which these could be utilised. 

The Group and Company would crystallise an STC liability of approximately R180 million and R216 million, respectively 

(2009: R175 million and R222 million, respectively) on ultimate distribution of its unremitted earnings to external shareholders. 

23 Retirement benefits 

The Group and Company operate post-retirement defined contribution and defined benefit plans for the majority of their 

employees. They also operate post-retirement medical plans. The accounting policy for pensions and post-retirement benefits is 

included in note 1. 

Defined contribution plans 

The assets of the defined contribution plans are held separately in independently administered funds. The charge in respect of 

these plans for the Group totalling R85 million (2009: R89 million) and for the Company totalling R40 million (2009: R41 million) is 

calculated on the basis of the contribution payable by the Group and Company in the financial year. There were no material 

outstanding or prepaid contributions recognised in relation to these plans as at the reporting dates presented. 




continued 


23 Retirement benefits (continued) 

Defined benefit pension plans 

The defined benefit scheme is actuarially valued at intervals of not more than three years using the projected unit credit method. 

The last statutory actuarial valuation was performed as at 31 December 2008, with the fund being in a sound financial position at 

that time. The next full statutory actuarial valuation will be undertaken during the 2011 financial year. The assets of this plan are 

held separately from those of the Company in independently administered funds, in accordance with the South African Pension 

Funds Act of 1956. 

Any deficits advised by the actuaries or that may arise from improved benefits are funded either immediately or through increased 

contributions to ensure the ongoing soundness of the schemes. 

On 30 June 2006, the Financial Services Board (FSB) approved certain amendments to the Mondi Pension Fund rules, 

effective 1 January 2005. In terms of the rule amendments, all future surpluses arising in the Fund will be for the benefit of the 

employer. Accordingly, the latest available actuarial estimate of this surplus, amounting to R81 million (2009: R83 million) at 

31 December 2010, has been recognised. 

Post-retirement medical plans 

The post-retirement medical plans provide health benefits to retired employees and certain of their dependants. Eligibility for cover 

is dependent upon certain criteria. These plans are unfunded and there are no plan assets in respect of post-retirement medical 

plans. The plan has been closed to new participants since 1 January 1999. 

The post-retirement medical aid liability is valued at intervals of not more than three years using the projected unit credit method. 

The actuarial present value of the promised benefits at the most recent valuation was performed during the 2010 financial year and 

indicates that the contractual post-retirement medical aid liability is adequately provided for within the financial statements. 

Actuarial assumptions 

The principal assumptions used to determine the actuarial present value of benefit obligations and pension costs are detailed 

below: 

Group and Company 

% 2010 2009 

Defined benefit pension plan 

Average discount rate for plan liabilities 8.39 9.11 

Average rate of inflation 5.63 5.65 

Average rate of increase in salaries 6.88 6.90 

Average rate of increase of pensions in payment 5.63 5.65 

Average long-term rate of return on plan assets 7.61 9.73 

Post-retirement medical plan 

Average discount rate for plan liabilities 8.39 9.11 

Expected average increase of healthcare costs 7.13 7.15 

The assumption for the average discount rate for plan liabilities is based on AA corporate bonds, which are of a suitable duration 

and currency. 



Mortality assumptions 

The assumed life expectations on retirement at age 65 are: 

Group and Company 

years 2010 2009 

Retiring today: 

Males 15.83-17.86 15.72-17.66 

Females 19.76-22.21 19.62-22.01 

Retiring in 20 years: 

Males 19.70-20.04 19.50-19.58 

Females 24.00-24.38 23.61-23.80 

The mortality assumptions have been based on published mortality tables in South Africa. 

The market value of assets is used to determine the funding level of the plans and is sufficient to cover 122% (2009: 122%) of the 

benefits which have accrued to members, after allowing for expected increases in future earnings and pensions. Companies within 

the Group are paying contributions at rates agreed with the schemes’ trustees and in accordance with local actuarial advice and 

statutory provisions. 

The defined benefit pension plan is closed to new members. Consequently, it is expected that the Group’s and Company’s share 

of contributions will increase as the schemes’ members age. 

The total loss, net of applicable tax, recognised in equity relating to experience movements on scheme liabilities and plan assets 

and actuarial assumption changes, excluding surplus restriction movements, for the year ended 31 December 2010 is a loss of 

R143 million (2009: gain of R81 million). The cumulative total recognised since 1 January 2004 is a gain of R168 million. 

Retirement benefits surplus/(obligation) 

The amounts recognised in the statement of financial position are determined as follows: 

Group Company 

R million 2010 2009 2010 2009 

Present value of unfunded obligations (827) (637) (741) (584) 

Present value of funded obligations (1,639) (1,548) (1,469) (1,380) 

Present value of pension plan liabilities (2,466) (2,185) (2,210) (1,964) 

Fair value of plan assets 1,997 1,892 1,791 1,690 

Deficit (469) (293) (419) (274) 

Surplus restrictions (277) (261) (262) (231) 

Deficit on pension and post-retirement 

medical plans (746) (554) (681) (505) 

Amounts reported in the statement of 

financial position 

Assets 

Retirement benefits surplus 81 83 60 79 

Liabilities 

Post-retirement medical plans (827) (637) (741) (584) 

Total retirement benefits obligation (827) (637) (741) (584) 




continued 



The changes in the present value of defined benefit obligations are as follows: 


Group 

2010 2009 

Post- Postretirement 

retirement 

Pension medical Total Pension medical Total 

R million plans plans plans plans plans plans 

At 1 January (1,548) (637) (2,185) (1,554) (649) (2,203) 

Current service cost (30) (2) (32) (34) (2) (36) 

Interest cost (141) (56) (197) (108) (45) (153) 

Actuarial (losses)/gains (14) (182) (196) 9 11 20 

Contributions paid by other members (7) – (7) (7) – (7) 

Benefits paid 105 52 157 146 48 194 

Transfer of members 1 (4) (2) (6) – – – 

At 31 December (1,639) (827) (2,466) (1,548) (637) (2,185) 

Company 

2010 2009 


retirement 



At 1 January (1,380) (584) (1,964) (1,342) (593) (1,935) 

Current service cost (21) (1) (22) (21) (2) (23) 

Interest cost (126) (51) (177) (92) (41) (133) 

Actuarial (losses)/gains (25) (149) (174) (57) 5 (52) 

Contributions paid by other members (5) – (5) (5) – (5) 

Benefits paid 96 48 144 137 46 183 

Transfer of members 1 (8) (4) (12) – 1 1 

At 31 December (1,469) (741) (2,210) (1,380) (584) (1,964) 

Note: 

1 Members have been transferred from Mondi Shanduka Newsprint (Proprietary) Limited to Mondi Limited in March 2010. 

The changes in the fair value of plan assets are as follows: 

Group Company 

R million 2010 2009 2010 2009 

At 1 January 1,892 1,761 1,690 1,535 

Expected return on plan assets 179 128 160 111 

Actuarial (losses)/gains (2) 125 9 164 

Contributions paid by employer 22 17 13 12 

Contributions paid by other members 7 7 5 5 

Benefits paid (105) (146) (96) (137) 

Transfer of members 1 4 – 10 – 

At 31 December 1,997 1,892 1,791 1,690 

Note: 

1 Members have been transferred from Mondi Shanduka Newsprint (Proprietary) Limited to Mondi Limited in March 2010.


The expected return on plan assets is based on market expectations, at the beginning of a reporting period, for returns over the 

entire life of the related pension obligations. Expected returns may vary from one reporting period to the next in line with changes in 

long-run market sentiment and updated evaluations of historic fund performance. 

For the year ended 31 December 2010, the actual return on plan assets in respect of defined benefit pension schemes was a gain 

of R177 million (2009: gain of R253 million). 

The market values of the pension assets in these plans and the long-term expected rates of return as at the reporting dates 

presented are detailed below: 

Group 

2010 2009 

Rate Fair Rate Fair 

of return value of return value 

(%) (R million) (%) (R million) 

Equity 10.97 326 11.72 733 

Other 6.95 1,671 8.46 1,159 

Fair value of plan assets 1,997 1,892 

Company 

2010 2009 

Rate Fair Rate Fair 

of return value of return value 

(%) (R million) (%) (R million) 

Equity 10.97 292 11.72 655 

Other 6.95 1,499 8.46 1,035 

Fair value of plan assets 1,791 1,690 




continued 



Income statement 

The amounts recognised in the income statement are as follows: 

Group 

2010 2009 


retirement 



Analysis of the amount charged to 

operating profit 

Current service costs 30 2 32 34 2 36 

Total within operating costs 30 2 32 34 2 36 

Analysis of the amount charged/(credited) 

to net finance costs on plan liabilities 

Expected return on plan assets 1 (179) – (179) (128) – (128) 

Interest costs on plan liabilities 2 141 56 197 108 45 153 

Net (credit)/charge to net finance costs (38) 56 18 (20) 45 25 

Total (credit)/charge to income statement (8) 58 50 14 47 61 

Notes: 

1 

2 

Included in investment income (see note 5). 

Included in interest expense (see note 5). 

Company 

2010 2009 


retirement 



Analysis of the amount charged to 

operating profit 

Current service costs 21 1 22 21 2 23 

Total within operating costs 21 1 22 21 2 23 

Analysis of the amount charged/(credited) 

to net finance costs on plan liabilities 

Expected return on plan assets 1 (160) – (160) (111) – (111) 

Interest costs on plan liabilities 2 126 51 177 92 41 133 

Net (credit)/charge to net finance costs (34) 51 17 (19) 41 22 

Total (credit)/charge to income statement (13) 52 39 2 43 45 

Notes: 

1 

2 

Included in investment income (see note 5). 

Included in interest expense (see note 5). 



Sensitivity analysis 

Assured healthcare trend rates have a significant effect on the amounts recognised in the income statement. A 1% change in 

assumed healthcare cost trend rates would have the following effects on the post-retirement medical plans: 

Group Company 

R million 1% increase 1% decrease 1% increase 1% decrease 

Effect on the aggregate of the current service 

cost and interest cost 7 (6) 6 (5) 

Effect on the defined benefit obligation 94 (80) 85 (64) 

The Group’s and Company’s defined benefit pension and post-retirement medical arrangements, for the five years ended 

31 December 2010, are summarised as follows: 

R million 2010 2009 2008 2007 2006 

Assets 

Defined benefit plans in surplus 81 83 – 75 45 

Liabilities 

Post-retirement medical plans (827) (637) (649) (709) (696) 

Experience adjustments 

On plan liabilities (40) (64) (173) (146) 130 

On plan assets (2) 125 (51) 21 187 

Total experience adjustments (42) 61 (224) (125) 317 

Group 

Company 

R million 2010 2009 2008 2007 2006 

Assets 

Defined benefit plans in surplus 60 79 – 72 42 

Liabilities 

Post-retirement medical plans (741) (584) (593) (663) (647) 

Experience adjustments 

On plan liabilities (49) (124) (144) (134) 262 

On plan assets 9 164 (34) 16 178 

Total experience adjustments (40) 40 (178) (118) 440 




continued 


24 Other comprehensive income 

Group 

2010 2009 

Before- Net- Before- Nettax 

Tax of-tax tax Tax of-tax 

R million amount benefit amount amount expense amount 

Cash flow hedges: (7) 7 – 6 – 6 

Fair value (losses)/gains arising during 

the year (21) 6 

Less: Reclassification adjustments for 

losses included in the income 

statement 14 – 


on post-retirement benefit schemes (214) 60 (154) 91 (26) 65 

Fair value gain on option 3 – 3 – – – 

Total other comprehensive income (218) 67 (151) 97 (26) 71 


Non-controlling interests (2) 4 

Equity holders of the parent company (149) 67 

Company 

2010 2009 

Before- Net- Before- Nettax 

Tax of-tax tax Tax of-tax 

R million amount benefit amount amount expense amount 


on post-retirement benefit schemes (196) 54 (142) 74 (21) 53 

Total other comprehensive income (196) 54 (142) 74 (21) 53 

25 Asset values per share 

Net asset value per share is defined as net assets divided by the number of ordinary shares in issue as at the reporting dates 

presented, less treasury shares held. Tangible net asset value per share is defined as the net assets less intangible assets divided 

by the number of ordinary shares in issue as at the reporting dates presented, less treasury shares held. 

Rand 2010 2009 

Net asset value per share 50.03 49.29 

Tangible net asset value per share 45.61 44.60 


Group

26 Share capital and share premium 

Authorised 

Number of 

shares R million 

Mondi Limited R0.20 ordinary shares 250,000,000 50 

Mondi Limited R0.20 special converting shares 650,000,000 130 

There has been no change to the authorised share capital of the Company since listing on the JSE Limited on 3 July 2007. 

Called up, allotted and fully paid/R million 

2010 Number of shares Share capital Share premium Total 

Mondi Limited R0.20 ordinary shares issued on the JSE 146,896,322 29 5,073 5,102 

Mondi Limited R0.20 special converting shares 1 367,240,805 74 – 74 

Total shares 514,137,127 103 5,073 5,176 

Called up, allotted and fully paid/R million 

2009 Number of shares Share capital Share premium Total 

Mondi Limited R0.20 ordinary shares issued on the JSE 146,896,322 29 5,073 5,102 

Mondi Limited R0.20 special converting shares 1 367,240,805 74 – 74 

Total shares 514,137,127 103 5,073 5,176 

Note: 

1 

The special converting shares are held in trust and do not carry dividend rights. The special converting shares provide a mechanism for equality of treatment on 

termination for both Mondi Limited and Mondi plc ordinary equity holders. 

The treasury shares purchased represents the cost of shares in Mondi Limited purchased in the market and held by the 

Mondi Incentive Schemes Trust to satisfy options under the Group’s employee share schemes (see note 27). These costs are 

reflected in the statements of changes in equity. The number of ordinary shares held by the Mondi Incentive Schemes Trust as at 

31 December 2010 was 338,267 shares (2009: 53,700) at an average price of R53.40 per share (2009: R35.71 per share). 

27 Share-based payments 

Mondi share awards 

The Group and Company have set up their own share-based payment arrangements to incentivise employees. Full details of the 

Group’s share schemes are set out in the remuneration report. 

All of these schemes are settled by the award of ordinary shares in the Company. The Group and Company have no legal or 

constructive obligation to settle the awards made under these schemes in cash. Dividends foregone on BSP share schemes are 

paid in cash upon vesting. 

Certain demerger arrangements were instituted prior to, and in anticipation of, the demerger. These arrangements have all vested 

during the year ended 31 December 2009. 

The total fair value charge in respect of all the Mondi share awards granted during the year ended 31 December is made up 

as follows: 

Group Company 

R’000 2010 2009 2010 2009 

Bonus Share Plan (BSP) 12,161 6,432 5,102 1,957 

Long-Term Incentive Plan (LTIP) 4,686 1,812 3,624 2,014 

Demerger (see note 4) – 1,476 – 982 

Transitional BSP – 105 – (68) 

Total share-based payment expense 16,847 9,825 8,726 4,885 




continued 


27 Share-based payments (continued) 

The fair values of the share awards granted under the Mondi schemes are calculated with reference to the facts and assumptions 

presented below: 

Mondi Limited BSP 2008 BSP 2009 BSP 2010 

Date of grant 31 March 2008 27 March 2009 29 March 2010 

Vesting period (years) 3 3 3 

Expected leavers per annum (%) 5 5 5 

Grant date fair value per instrument (R) 60.92 18.87 53.06 

Mondi Limited LTIP 2008 LTIP 2009 LTIP 2010 

Date of grant 31 March 2008 27 March 2009 29 March 2010 

Vesting period (years) 3 3 3 

Expected leavers per annum (%) 5 5 5 

Expected outcome of meeting performance criteria (%) 

EPS component – N/A N/A 

ROCE component – 66 90 

TSR component 100 100 25 

Grant date fair value per instrument (R) 62.12 19.26 

ROCE component 50.51 

TSR component 1 12.63 

Note: 

1 The base fair value has been adjusted for contractually-determined market-based performance conditions. 

A reconciliation of share award movements for the Mondi share schemes is shown below: 


Shares 

conditionally Shares Shares 

awarded in vested in lapsed in 

2010/Scheme 1 January year year year 31 December 

BSP 824,360 383,683 (86,487) – 1,121,556 

LTIP 811,634 292,375 (10,948) (84,523) 1,008,538 

Total 1,635,994 676,058 (97,435) (84,523) 2,130,094 


Shares 

conditionally Shares Shares 

awarded in vested in lapsed in 

2009/Scheme 1 January year year year 31 December 

BSP 336,503 558,376 (50,826) (19,693) 824,360 

LTIP 264,538 593,883 – (46,787) 811,634 

Transitional BSP 50,936 – (49,549) (1,387) – 

Transitional LTIP 23,083 – (23,083) – – 

Demerger arrangements 171,868 – (171,868) – – 

Total 846,928 1,152,259 (295,326) (67,867) 1,635,994 


28 Business combinations 

To 31 December 2010 

There were no major acquisitions for the year ended 31 December 2010. 

To 31 December 2009 

There were no major acquisitions for the year ended 31 December 2009. 

Details of the aggregate net assets acquired, as adjusted from book to fair value, and the attributable goodwill are presented as 

follows: 

R million Book value Revaluation Fair value 

Net assets acquired: 1 

Property, plant and equipment 1 – 1 

Net assets acquired 1 – 1 

Goodwill arising on acquisition – 

Total cost of acquisition 1 

Cash acquired net of overdrafts – 

Net cash paid 1 

Note: 

1 The business combinations were not individually material and therefore have not been shown separately. 

29 Disposal of subsidiaries and associates 

The Group disposed of components of its BU North division in April and October 2010 that was classified as held for sale in 2009. 

The Group disposed of its 100% holding in Cape Quick Packaging (Proprietary) Limited on 31 July 2009. 


Net assets disposed: 

Property, plant and equipment – 1 

Inventories – 1 

Trade and other receivables – 4 

Cash and cash equivalents – 1 

Assets held for sale 358 – 

Deferred tax liabilities – 2 

Trade and other payables – (5) 

Overdraft – (2) 

Reserves – 3 

Goodwill – 1 

Liabilities held for sale (93) – 

Total net assets disposed 265 6 

Profit on disposal (see note 4) 152 – 

Disposal proceeds 417 6 

Net overdraft disposed – 1 

Deferred consideration (60) (6) 

Net cash inflow from disposals 357 1 




continued 


30 Disposal groups and assets held for sale 

Group Company 

R million 2010 2009 2010 2009 

Property, plant and equipment 12 38 10 37 

Forestry assets – 333 – 333 

Total non-current assets 12 371 10 370 

Inventories – 1 – 1 

Total current assets – 1 – 1 

Total assets classified as held for sale 12 372 10 371 

Provisions – (2) – (2) 

Total current liabilities – (2) – (2) 

Deferred tax liabilities – (91) – (91) 

Total non-current liabilities – (91) – (91) 

Total liabilities directly associated with assets 

classified as held for sale – (93) – (93) 

Net assets 12 279 10 278 

31 Cash flow analysis 

(a) Reconciliation of profit/(loss) before tax to cash generated from operations 

Group Company 

R million 2010 2009 2010 2009 


Depreciation and amortisation 842 845 507 505 

Share-based payments 18 10 10 6 

Share options exercised – Anglo American 

share scheme (1) (4) (1) (4) 

Non-cash effect of special items 48 227 34 217 

Net finance costs/(income) 334 483 (67) (1) 

Net income from associates (3) – – – 

Increase/(decrease) in provisions 37 (18) 20 (22) 

Decrease in post-employment benefits (42) (29) (39) (35) 

Decrease in inventories 89 138 103 146 

(Increase)/decrease in operating receivables (50) 497 45 367 

(Decrease)/increase in operating payables (87) 41 (76) (75) 

Fair value gains on forestry assets (349) (323) (208) (243) 

Felling costs 635 581 496 455 

Loss/(profit) on disposal of tangible and 

intangible assets 2 (53) 4 (53) 

(Increase)/decrease in held for trading derivatives (6) 20 (13) 23 

Other impairments – (1) – (11) 

Other adjustments (26) 26 2 7 

Cash generated from operations 2,020 2,518 1,154 1,263 


31 Cash flow analysis (continued) 

(b) Cash and cash equivalents 

Group Company 

R million 2010 2009 2010 2009 

Cash and cash equivalents per statement 

of financial position 216 422 8 4 

Bank overdrafts included in short-term borrowings (437) (621) (433) (616) 

Net cash and cash equivalents per statement 

of cash flows (221) (199) (425) (612) 

The fair value of cash and cash equivalents approximate the carrying values presented. 

(c) Movement in net debt 

The net debt position, excluding disposal groups is as follows: 

Current 

Cash Debt due Debt due financial Loans to 

and cash within one after one asset related Total net 

R million equivalents year 1 year investments parties debt 

At 1 January 2009 149 (1,142) (3,727) – – (4,720) 

Cash flow (98) 891 59 – – 852 

Disposal of businesses (see note 29) 1 – – – – 1 

Reclassifications (251) (677) 929 – – 1 

At 31 December 2009 (199) (928) (2,739) – – (3,866) 

Cash flow (22) 914 (189) – – 703 

Movement in unamortised loan costs – – (3) – – (3) 

Reclassifications – (1,364) 1,364 4 – 4 

At 31 December 2010 (221) (1,378) (1,567) 4 – (3,162) 

Group 

Company 

Current 

Cash Debt due Debt due financial Loans to 

and cash within one after one asset related Total net 

R million equivalents year 1 year investments parties debt 

At 1 January 2009 (132) (640) (1,819) 1 2,096 (494) 

Cash flow (230) 640 (270) – 317 457 

Reclassifications (250) (566) 819 (1) (107) (105) 

At 31 December 2009 (612) (566) (1,270) – 2,306 (142) 

Cash flow 187 454 (200) – 281 722 

Movement in unamortised loan costs – – (3) – – (3) 

Reclassifications – (1,174) 1,174 22 – 22 

At 31 December 2010 (425) (1,286) (299) 22 2,587 599 

Note: 

1 Excludes overdrafts, which are included as cash and cash equivalents. As at 31 December 2010, short-term borrowings on the statement of financial position for the 

Group and Company of R1,815 million and R1,719 million, respectively (2009: R1,549 million and R1,182 million, respectively), include R437 million and R433 million of 

overdrafts, respectively (2009: R621 million and R616 million, respectively). 




continued 


32 Capital commitments 

Group Company 

R million 2010 2009 2010 2009 

Contracted for but not provided 242 135 92 56 

Approved, not yet contracted for 365 414 321 357 

These capital commitments will be financed by existing cash resources and borrowing facilities. 

Capital commitments are based on capital projects approved to date and the budget approved by the board. Major capital 

projects still require further approval before they commence. 

33 Contingent liabilities and contingent assets 

Contingent liabilities for the Group and Company comprise aggregate amounts at 31 December 2010 of R98 million and 

R74 million, respectively (2009: R84 million and R71 million, respectively) in respect of loans and guarantees given to banks and 

other third parties. 

There are a number of legal or potential claims against the Group and Company. Provision is made for all liabilities that are 

expected to materialise. 

There were no significant contingent assets for the Group and Company for both the years presented. 

34 Operating leases 

As at 31 December, the outstanding commitments under non-cancellable operating leases were: 

Group Company 

R million 2010 2009 2010 2009 

Expiry date 

Within one year 199 251 139 195 

One to two years 189 245 117 173 

Two to five years 393 635 239 471 

After five years 428 526 97 151 

Total operating leases 1,209 1,657 592 990 

The majority of these operating leases relate to land and buildings. 

In addition to the above, the Group entered into a land lease agreement on 1 January 2001 for a total term of 70 years. The 

operating lease commitment and annual escalation rate are renegotiated every five years. The operating lease charge recorded in 

the Group’s consolidated income statement amounted to R8 million (2009: R8 million). There are 60 years remaining on the lease. 

The operating lease commitments of this lease are not included in the table above. 

35 Capital management 

The Group and Company review their total capital employed on a regular basis and make use of several indicative ratios which are 

appropriate to the nature of the Group’s operations and are consistent with conventional industry measures. The principal ratios 

used in this review process are: 

• gearing, defined as net debt divided by total capital employed; and 

• return on capital employed, defined as underlying operating profit, plus share of associates’ net income, before special items, 

divided by average capital employed. 


36 Financial risk management 

The Group’s and Company’s trading and financing activities expose them to various financial risks that, if left unmanaged, could 

adversely impact on current or future earnings. Although not necessarily mutually exclusive, these financial risks are categorised 

separately according to their different generic risk characteristics and include market risk (foreign exchange risk and interest rate 

risk), credit risk and liquidity risk. The Group and Company are actively engaged in the management of all of these financial risks in 

order to minimise their potential adverse impact on the Group’s and Company’s financial performance. 

The principles, practices and procedures governing the Group-wide financial risk management process have been approved by 

the board and are overseen by the DLC executive committee. In turn, the DLC executive committee delegates authority to a 

central treasury function (Group treasury) for the practical implementation of the financial risk management process across the 

Mondi Group and for ensuring that the Mondi Group’s entities adhere to specified financial risk management policies. Group 

treasury continually reassesses and reports on the financial risk environment, identifying, evaluating and hedging financial risks by 

entering into derivative contracts with counterparties where appropriate. Local treasury teams assist Group treasury in the 

management of financial risk exposures and are authorised to enter into derivative contracts locally, subject to pre-agreed and 

constantly reviewed limits. The Group and Company do not take speculative positions on derivative contracts and only enter into 

contractual arrangements with counterparties that have investment grade credit ratings. 

Market risk 

The Group’s and Company’s activities expose them primarily to foreign exchange and interest rate risk. Both risks are actively 

monitored on a continuous basis and managed through the use of foreign exchange contracts and interest rate swaps respectively. 

Although the Group’s and Company’s cash flows are exposed to movements in key input and output prices, such movements 

represent economic rather than residual financial risk inherent to the Group and Company. 

Foreign exchange risk 

The Group’s and Company operate across various national boundaries and are exposed to foreign exchange risk in the normal 

course of their business. Multiple currency exposures arise from forecast commercial transactions denominated in foreign 

currencies, recognised financial assets and liabilities (monetary items) denominated in foreign currencies and the translational 

exposure on net investments in foreign operations. 

Foreign exchange contracts 

The Group’s and Company’s foreign exchange policy require their subsidiaries to actively manage foreign currency exposures 

against their functional currencies by entering into foreign exchange contracts. For segmental reporting purposes, each subsidiary 

enters into, and accounts for, foreign exchange contracts with Group treasury or with counterparties that are external to the Group 

and Company, whichever is more commercially appropriate. 

Only material balance sheet exposures and highly probable forecast capital expenditure transactions are hedged. 

Currencies bought or sold forward to mitigate possible unfavourable movements on recognised monetary items are marked to 

market at each reporting date. Foreign currency monetary items are translated at each reporting date to incorporate the underlying 

foreign exchange movements and any such movements naturally off-set fair value movements on related foreign exchange 

contracts. 

Foreign currency sensitivity analysis 

Foreign exchange risk sensitivity analysis has been performed on the foreign currency exposures inherent in the Group’s and 

Company’s financial assets and financial liabilities at the reporting dates presented, net of related foreign exchange contracts. 

The sensitivity analysis provides an indication of the impact on the Group’s and Company’s reported earnings of reasonably 

possible changes in the currency exposures embedded within the functional currency environments that the Group and Company 

operate in. In addition, an indication is provided of how reasonably possible changes in foreign exchange rates might impact on 

the Group’s and Company’s equity, as a result of fair value adjustments to foreign exchange contracts designated as cash flow 

hedges. Reasonably possible changes are based on an analysis of historic currency volatility, together with any relevant 

assumptions regarding near-term future volatility. 




continued 


36 Financial risk management (continued) 

Resultant impacts of reasonably possible changes to foreign exchange rates 

The Group and Company believe that for each functional to foreign currency net monetary exposure it is reasonable to assume a 

5% appreciation/depreciation of the functional currency. The corresponding fair value impacts on the Group’s consolidated income 

statement would be +/-R3 million (2009: +/-R2 million). 

The corresponding fair value impact on the Group’s equity, resulting from the application of these reasonably possible changes to 

the valuation of the Group’s foreign exchange contracts designated as cash flow hedges, would have been Rnil (2009: Rnil). It has 

been assumed that changes in the fair value of foreign exchange contracts designated as cash flow hedges of non-monetary 

assets and liabilities are fully recorded in equity and that all other variables are held constant. 

Interest rate risk 

The Group and Company hold cash and cash equivalents, which earn interest at a variable rate and has variable and fixed rate 

debt in issue. Consequently, the Group and Company are exposed to interest rate risk. Although the Group and Company have 

fixed rate debt in issue, the Group’s and Company’s accounting policy stipulates that all borrowings are held at amortised cost. As 

a result, the carrying value of fixed rate debt is not sensitive to changes in credit conditions in the relevant debt markets and there 

is therefore no exposure to fair value interest rate risk. 

Management of cash and cash equivalents 

Cash and cash equivalents comprise cash in hand and demand deposits, together with short-term highly liquid investments which 

have a maturity of three months or less from the date of acquisition. Centralised cash pooling arrangements are in place, which 

ensure that cash is utilised most efficiently for the ongoing working capital needs of the Group’s and Company’s operating units 

and, in addition, to ensure that the Group and Company earn the most advantageous rates of interest available. 

Management of variable rate debt 

The Group and Company have multiple variable rate debt facilities. Group treasury uses interest rate swaps to hedge certain 

exposures to movements in the Johannesburg Interbank Agreed Rate (JIBAR). 

Interest rate swaps are ordinarily formally designated as cash flow hedges and are fair valued at each reporting date. The fair value 

of interest rate swaps are determined at each reporting date by reference to the discounted contractual future cash flows, using 

the relevant currency-specific yield curves, and the credit risk inherent in the contract. 

The Group’s and Company’s cash and cash equivalents also act as a natural hedge against possible unfavourable movements in 

the relevant inter-bank lending rates on its variable rate debt, subject to any interest rate differentials that exist between corporate 

saving and lending rates. 

Net variable rate debt sensitivity analysis 

The net variable rate exposure represents variable rate debt less the future cash outflows swapped from variable-to-fixed via 

interest rate swap instruments and cash and cash equivalents. Reasonably possible changes in interest rates have been applied to 

net variable rate exposure, in order to provide an indication of the possible impact on the Group’s consolidated income statement. 

A 50 basis points movement in the interest rate will impact the earnings for the year by R13 million (2009: R14 million). 

Credit risk 

The Group’s and Company’s credit risk is mainly confined to the risk of customers defaulting on sales invoices raised. Several 

Group entities have also issued certain financial guarantees to external counterparties in order to achieve competitive funding rates 

for specific debt agreements entered into by other Group entities. None of these financial guarantees contractually obligate the 

Group and Company to pay more than the recognised financial liabilities in the entities concerned. As a result, these financial 

guarantee contracts have no bearing on the credit risk profile of the Group or Company as a whole. Full disclosure of the Group’s 

and Company’s maximum exposure to credit risk is presented in the following table. 



Exposure to credit risk 

Group Company 

R million 2010 2009 2010 2009 

Cash and cash equivalents 216 422 8 4 

Derivative financial instruments 19 7 17 3 

Trade and other receivables (excluding prepayments 

and accrued income) 2,221 2,132 1,174 1,155 

Loans and receivables 1 137 81 13 8 

Total credit risk exposure 2,593 2,642 1,212 1,170 

Note: 

1 Loans and receivables excludes amounts owing by related parties. 

Credit risk associated with trade receivables 

The Group and Company have a large number of unrelated customers and does not have any significant credit risk exposure to 

any particular customer. 

Each business segment manages its own exposure to credit risk according to the economic circumstances and characteristics of 

the relevant markets that they serve. The Group and Company believe that management of credit risk on a devolved basis enables 

it to assess and manage credit risk more effectively. However, broad principles of credit risk management practice are observed 

across all business segments, such as the use of credit rating agencies, credit guarantee insurance, where appropriate, and the 

maintenance of a credit control function. Of the total trade receivables balance of R1,997 million (2009: R1,982 million) included in 

trade and other receivables reported in the consolidated statement of financial position (see note 17), credit insurance covering 

R394 million (2009: R400 million) of the total balance has been taken out by the Group’s trading entities to insure against the 

related credit default risk. The insured cover is presented gross of contractually agreed excess amounts. 

Liquidity risk 

Liquidity risk is the risk that the Group and Company could experience difficulties in meeting its commitments to creditors as 

financial liabilities fall due for payment. The Group and Company manage their liquidity risk by using reasonable and 

retrospectively-assessed assumptions to forecast the future cash-generative capabilities and working capital requirements of the 

businesses it operates and by maintaining sufficient reserves, committed borrowing facilities and other credit lines as appropriate. 

The following table shows the amounts available to draw down on its committed loan facilities. 

Group Company 

R million 2010 2009 2010 2009 

Expiry date 

In one year or less 140 146 – – 

In more than one year – – – – 

Total credit available 140 146 – – 

The Group has R752 million (2009: R553 million) available to draw down on its uncommitted loan facilities. 

Forecast liquidity represents the Group’s and Company’s expected cash inflows, principally generated from sales made to 

customers, less the Group’s and Company’s contractually-determined cash outflows, principally related to supplier payments and 

the repayment of borrowings, including finance lease obligations, plus the payment of any interest accruing thereon. The matching 

of these cash inflows and outflows rests on the expected ageing profiles of the underlying assets and liabilities. Short-term financial 

assets and financial liabilities are represented primarily by the Group’s and Company’s trade receivables and trade payables 

respectively. The matching of the cash flows that result from trade receivables and trade payables takes place typically over a 

period of three to four months from recognition in the statement of financial position and is managed to ensure the ongoing 

operating liquidity of the Group and Company. Financing cash outflows may be longer-term in nature. The Group and Company 

do not hold long-term financial assets to match against these commitments, but is significantly invested in long-term non-financial 

assets which generate the sustainable future cash inflows, net of future capital expenditure requirements, needed to service and 

repay the Group’s and Company’s borrowings. The Group and Company also assess their commitments under interest rate 

swaps, which hedge future cash flows from two to five years from the reporting date presented. 




continued 



Contractual maturity analysis 

Trade receivables, the principal class of non-derivative financial asset held by the Group and Company, are settled gross by 

customers. The Group’s and Company’s financial investments, which are not held for trading and therefore do not comprise part of 

the Group’s and Company’s liquidity planning arrangements, make up the remainder of the non-derivative financial assets held. 

The following table presents the Group’s and Company’s outstanding contractual maturity profile for its non-derivative financial 

liabilities. The analysis presented is based on the undiscounted contractual maturities of the Group’s and Company’s financial 

liabilities, including any interest that will accrue, except where the Group and Company are entitled and intend to repay a financial 

liability, or part of a financial liability, before its contractual maturity. Non-interest bearing financial liabilities which are due to be 

settled in less than 12 months from maturity equal their carrying values, since the impact of the time value of money is immaterial 

over such a short duration. 

Maturity profile of outstanding financial liabilities 

2010/R million


Company 

2009/R million



continued 



Company 

2009/R million

37 Related party transactions (continued) 

Joint Mondi plc 

2010/R million ventures subsidiaries 

Sales to related parties 119 1,443 

Purchases from related parties 6 6 

Receivables due from related parties 71 250 

Payables due to related parties 1 7 

Joint Mondi plc 

2009/R million ventures subsidiaries 

Sales to related parties 51 1,784 

Purchases from related parties 7 2 

Receivables due from related parties 24 301 

Payables due to related parties 5 65 

Company 

Mondi 

Incentive 

Joint Mondi plc Schemes 

2010/R million ventures subsidiaries Subsidiaries Trust 

Sales to related parties – 1,322 722 – 

Purchases from related parties 8 4 232 – 

Net finance income 21 – 263 – 

Loans to related parties 240 – 2,235 – 

Receivables due from related parties 158 235 189 – 

Payables due to related parties 12 7 115 – 

Shareholder’s loan to related parties 128 – 239 – 

Total borrowings from related parties – – 112 – 

Investment – – – 18 

Company 

Mondi 

Incentive 

Joint Mondi plc Schemes 

2009/R million ventures subsidiaries Subsidiaries Trust 

Sales to related parties – 1,677 737 – 

Purchases from related parties 3 1 265 – 

Net finance income 12 – 295 – 

Loans to related parties 121 – 2,074 – 

Receivables due from related parties 121 273 245 – 

Payables due to related parties 11 62 103 – 

Shareholder’s loan to related parties 128 – 239 – 

Total borrowings from related parties – – 93 – 

Investment – – – 2 

Group 

Group 




continued 


37 Related party transactions (continued) 

Cyril Ramaphosa, joint chairman of Mondi, has a 33.1% (2009: 34.3%) stake in Shanduka Group (Proprietary) Limited. The Group 

and Company, in their normal course of business, and on an arm’s length basis, enters into various transactions with Shanduka 

Group (Proprietary) Limited and its subsidiaries, the details of which are disclosed as follows: 

Group Company 

R million 2010 2009 2010 2009 

Fees paid for management services provided – 5 – – 

Purchases from Shanduka Group 183 142 121 106 

Shareholders’ loan due to Shanduka Group 260 260 – – 

Payables due to Shanduka Group 6 5 5 3 

38 Group companies 

The principal subsidiaries, joint ventures and associates of the Group as at the reporting dates presented, and the Group’s 

percentage of equity owned, together with the Group’s interests in joint venture entities are presented below. All of these interests 

are consolidated within these financial statements. The Group has restricted the information to its principal subsidiaries and joint 

venture. 


Percentage equity owned1 Country of 

incorporation Business 2010 2009 

Subsidiary undertaking 

Mondi Packaging South Africa 

(Proprietary) Limited 2 South Africa Packaging 70 70 

Siyaqhubeka Forests 

(Proprietary) Limited South Africa Forestry 51 51 

Joint venture 

Mondi Shanduka Newsprint 

(Proprietary) Limited 3,4 South Africa Newsprint 50 50 

Notes: 

1 

This represents the percentage of equity owned and the proportion of voting rights held by the Group. 

2 

Consolidated at 75% due to the contractual arrangement with the subsidiary’s employee share ownership trust. 

3 

The presumption of significant influence over this entity does not apply because the economic activities of this entity are jointly controlled under a contractual 

arrangement that has been entered into with the venturer party. 

4 

Due to the contractual arrangements with the entity’s employee share and community ownership trust, shareholdings are proportionately consolidated at 58%. 

These companies operate principally in the countries in which they are incorporated. Non-operating intermediate holding 

companies are excluded from the above table. 

The Group’s share of profits from subsidiary entities, excluding joint ventures, for the year ended 31 December 2010 is R54 million 

(2009: losses of R47 million). 

39 Events occurring after 31 December 2010 

With the exception of the proposed final dividend for 2010, included in note 8, there have been no material reportable events since 

31 December 2010.

Shareholders’ information 

Shareholders’ analysis 

As at 31 December 2010 Mondi Limited had 146,896,322 ordinary shares in issue, of which 2,527,204 were held as Depositary 

Interests. 

On 29 November 2010 Mondi Limited gave notice to the Depositary to terminate the Depositary Interest facility and therefore the 

Deed Poll dated the 29 May 2007. The termination of the Depositary Interests takes effect on 7 March 2011. 

By size of holding 

Number of 

shareholders % of shareholders Size of shareholding Number of shares % of shares 

33,580 94.61 1 – 500 1,023,549 0.70 

610 1.72 501 – 1,000 448,424 0.30 

607 1.71 1,001 – 5,000 1,302,302 0.89 

421 1.19 5,001 – 50,000 8,133,332 5.54 

246 0.69 50,001 – 1,000,000 48,611,433 33.09 

29 0.08 1,000,001 – highest 87,377,282 59.48 

Secretary 

35,493 100.00 146,896,322 100.00 

By type of holding 

Number of shareholders Number of shares % of shares 

Public1 35,489 146,552,695 99.77 

Non-public 4 343,627 0.23 

Directors of Mondi Limited/Mondi plc 3 5,360 0.00 

Mondi staff share schemes2 1 338,267 0.23 

Total 35,493 146,896,322 100.00 

1 As per the Listings Requirements of the JSE Limited. 

2 Shares held for the purposes of Mondi staff share schemes are held in trust on behalf of scheme participants. 


4th Floor 


Melrose Arch 

2196 

Gauteng 


Telephone number national: 

011 994 5420 

Telephone number international: 

+27 11 994 5420 

Transfer Secretaries/ 

Administration 

Link Market Services South Africa 

(Pty) Ltd 

Attention: Iqbal Haniff 

11 Diagonal Street 

Johannesburg 

2001 

Gauteng 



011 630 0800 


+27 11 630 0800 

JSE Sponsor 

UBS South Africa (Pty) Ltd 

Attention: Gary Hudson 

64 Wierda Road East 

Wierda Valley 

Sandton 

2196 

Gauteng 



011 322 7641 


+27 11 322 7641 

Registered and head 

office 


4th Floor 


Melrose Arch 

2196 

Gauteng 



011 994 5400 


+27 11 994 5400 

Registered in South Africa 

Registered No. 1967/013038/06 

Website: www.mondigroup.com

For further information, please see: 

Mondi Group 

Annual report and accounts 2010 

Mondi Group 

Sustainable Development Review 2010 

www.mondigroup.com 

www.mondigroup.com/sustainability 

Design by Russell and Associates 

www.rair.co.za 

Printed by Colorpress (pty) ltd 

on FSC TM certified Mondi 

250gsm MAESTRO ® PRINT and 

120gsm MAESTRO ® PRINT 

Forward-looking statements 

This document includes forward-looking statements. All statements other than statements of historical facts included herein, including, without limitation, 

those regarding Mondi’s financial position, business strategy, plans and objectives of management for future operations, are forward-looking statements. 

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or 

achievements of Mondi, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such 

forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Mondi’s present and future business 

strategies and the environment in which Mondi will operate in the future. Among the important factors that could cause Mondi’s actual results, 

performance or achievements to differ materially from those in the forward-looking statements include, but are not limited to, those discussed under 

Principal risks and uncertainties, on page 31 of the Mondi Group annual report and accounts 2010. These forward-looking statements speak only as of 

the date on which they are made. Mondi expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forwardlooking 

statement contained herein to reflect any change in Mondi’s expectations with regard thereto or any change in events, conditions or 

circumstances on which any such statement is based.

Mondi Limited

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